Oil prices dip in Asia after touching 2016 highs

Oil prices dipped in Asia on Thursday as investors locked in profits after the previous day’s surge to six-month highs that was fuelled by a surprise decline in U.S. stockpiles.

The U.S. Department of Energy said Wednesday that inventories slid 3.4 million barrels last week, confounding analysts’ expectations for a rise and signaling strong demand in the world’s top oil-consuming nation.

The report also said U.S. oil production fell, providing hope to a market burdened by a stubborn global supply glut.

At around 0620 GMT, U.S. benchmark West Texas Intermediate for delivery in June was down five cents, or 0.11 percent, at US$46.18 and Brent crude fell eight cents, or 0.17 percent, at US$47.52 a barrel.

WTI jumped 3.5 percent Wednesday while Brent climbed 4.6 percent, putting both contracts around levels not seen since November.

Traders “maybe feel that prices have moved up too much. Sometimes they are trying to get to a certain level where they can sell and then lock in profits,” said Bernard Aw, an analyst with IG Markets Singapore.

News of the unexpected decline in U.S. commercial crude stockpiles “had more of an impact on prices because they (traders) were expecting an increase in the inventories,” he added.

While the fundamentals of oversupply and weak demand remain, Aw said short-term disruptions such as the wildfires in Canada’s oil-rich Alberta region and the closure of a key Shell pipeline in Nigeria following a leak are boosting prices.

“If you look at the current trend for oil, it has been steadily climbing. But overall, the fundamental picture has not materially changed,” he said.

EY oil and gas analyst Sanjeev Gupta said: “In the near term, the market will seek clues from the upcoming eurozone economy data as well as key (economic growth) and inflation statistics from Japan and the U.S.”

A meeting of the OPEC oil cartel on June 2 in Vienna would also impact the market, he added.

Source: China Post