Oil slides on resurgent supply glut worries

Dunya News

IG Markets analyst Bernard Aw agreed that oversupply was the central factor

LONDON (AFP) - World oil prices fell Friday on resurgent worries over a supply glut and weak demand, with some analysts forecasting crude prices could fall to $40 a barrel.

At about 1130 GMT, Brent North Sea crude for September delivery was down 22 cents at $47.15 a barrel.

US benchmark West Texas Intermediate for delivery in August shed 22 cents to $45.46 a barrel compared with Thursday s close.

Prices had Thursday recovered from two-month lows on the back of expectations of more stimulus measures in major economies.

But surging output from crude producers has reignited concern that the oversupply might not ease as quickly as expected.

"The return of oil glut fears seems to have begun to weigh on Brent crude once again, sending the black stuff back to $47 per barrel," Spreadex analyst Connor Campbell told AFP.

"Solid data from China -- though any figure from the country likely should be taken with a pinch of salt -- likely prevented a further fall, but nevertheless the commodity is still going through a mildly rough period at the moment."

IG Markets analyst Bernard Aw agreed that oversupply was the central factor.

"Oil prices are being dragged lower on renewed oversupply concerns," Aw said.

"We have seen OPEC output hitting its highest in recent history, lifted by Nigeria production and more supply from gulf producers.

"There were analyst warnings of oil reaching $40, which weighed on sentiments," he added.

Output from the Organization of the Petroleum Exporting Countries rose 300,000 barrels per day (bpd) in June to a near eight-year high of 32.73 million bpd, according to energy information provider S&P Global Platts.

It said this was driven by a tentative recovery in production in Nigeria and Libya, and a "steady" rise in output from Saudi Arabia and Iran.

The oversupply concerns come amid falling demand, especially from China, the world s top energy consumer.

S&P Global Platts said that China s apparent oil demand shrank by 2.7 percent in May from a year earlier.

"The contraction in oil demand in May represented the fourth consecutive month of negative growth and was due to declines in gas oil and fuel oil demand, amid slowing economic growth," it said.

"China s oil demand growth is expected to moderate significantly in 2016 as gross domestic product growth slows on the back of economic rebalancing."

Over the past month, oil has fluctuated between $44 and $52 per barrel, after hitting near 13-year lows below $30 in February on the back of high supplies.