Singapore | Oil prices dipped in Asia Friday, pulling back further from the psychological USD 50 level as traders took profit and expectations of tighter global supply receded. At about 0815 IST, US benchmark West Texas Intermediate for July delivery was down 29 cents at USD 49.19 a barrel while Brent North Sea crude, the European standard, was 33 cents lower at USD 49.26.
Oil prices had topped USD 50 a barrel for the first time this year yesterday following production disruptions in Canada and Nigeria as well as a drop in US crude inventories. The USD 50 level is an important point because it’s the price that makes economic sense for suppliers to start pumping again, CMC Markets trader Alex Wijaya told AFP. Crude oil prices have failed to hold above the USD 50 level due to concerns that higher prices could unlock more supply, he said. IG Asia analyst Bernard Aw wrote in a client note that the supply-demand situation has moved in favour of higher oil prices but added that the recent sharp rally was not proportional to the improvement.
Prices have rebounded from below USD 30 a barrel in early 2016 but they are still less than half their levels in mid- 2014, when crude was commanding more than USD 100 a barrel. Traders are now eyeing next week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna where a deal on capping production is to be discussed. There is probably a sliver of hope that OPEC producers will hammer out an agreement to support oil prices, be it to freeze production or otherwise. That chance is thin, analyst Aw said.
OPEC member Iran, which returned to world markets in January after the lifting of Western sanctions linked to its nuclear program, has so far refused to curb production. Tehran’s stance appeared to reinforce market doubts that OPEC would in fact take any firm action to curb chronic oversupply.