Oil prices edged up in Asian trade on Thursday, gaining support from a weaker dollar to hold above a three-week low hit in the previous session after a bigger-than-expected build in U.S. crude stocks added to concerns of a global oil glut.
Brent for December delivery rose 26 cents to $48.11 a barrel by 1.39 a.m. GMT. The global crude benchmark finished down 86 cents, or 1.8 percent, on Wednesday, after hitting $47.50, its lowest since early October.
U.S. crude for December delivery climbed 23 cents to $45.43 a barrel, having settled down $1.09, or 2.4 percent, in the previous session. It hit a three-week low of $44.86 on Wednesday.
The higher values came as the dollar index fell against a basket of six major currencies on Thursday. A weaker dollar makes dollar-denominated commodities, including oil, cheaper for buyers using other currencies.
Still, analysts said the support from the dollar was unlikely to signal an end to the downward trend in oil prices.
“I wouldn’t want to conclude there is a real bounce going on,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets. “I’d like to see U.S. crude go beyond $46 a barrel to conclude the downtrend had finished.”
Oil prices came under renewed pressure from worries about a global glut this week after U.S. crude inventories rose more than twice what analysts had expected.
U.S. crude stocks surged sharply for a second week, climbing 8 million barrels in the week to Oct. 16, data from the U.S. Department of Energy’s Energy Information Administration (EIA) showed on Wednesday. [EIA/S]
That jump followed a rise of more than 7.5 million barrels in the previous week and put U.S. crude stocks up more than 22 million barrels over the last four weeks.
“Robust U.S. oil production, which has moved below 9 million barrels per day, has allowed oil prices to stay low,” said Singapore’s Phillip Futures in a note on Thursday.
“On the bright side, we are still seeing declines in rig counts and this should soon translate into further drops to U.S. crude oil production.”
But declines in U.S. shale production have not been as large as people thought, Spooner said, even though rig numbers have fallen from 800 in April to under 600 now.
“If declines keep going at this rate it could be 18 months-two year’s away before lower production affects any rally we see in prices,” he said.
Commodity markets, including oil, have gained some relief from recent China data that indicate economic problems in the world’s second largest economy are not as great as some people expected, Spooner said.
China’s third quarter GDP growth was 6.9 percent, slightly ahead of forecast of 6.8 percent, according to data this week.
Oil experts from the Organization of the Petroleum Exporting Countries and non-member countries made no agreement this week to take steps to boost prices, officials said after talks in Vienna on Wednesday.(Reporting by Keith Wallis; Editing by Tom Hogue).