Oil recoups some losses, but gains seen as short lived Market unimpressed by the producers meeting

Uptrend is likely short-lived as the latest data suggests a respite from low prices could still be a long way off.

By Jenny W. Hsu

Crude-oil prices recouped earlier losses in Asia trade Thursday, mainly thanks to bargain hunting, but the uptrend is likely short-lived as the latest data suggests a respite from low prices could still be a long way off.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in December   traded at $45.42 a barrel, up $0.22 in the Globex electronic session. December Brent crude  on London’s ICE Futures exchange rose $0.25 to $48.10 a barrel.
Oil prices plunged overnight after the U.S. Energy Information Administration reported domestic crude-oil stockpiles expanded by 8 million barrels last week, much larger than the 3.5 million-barrel addition expected by the market and the 7.1 million-barrel build-up estimated by industry group American Petroleum Institute. Both the West Texas Intermediate and Brent saw the steepest fall this month by dropping 2.4% and 1.8% respectively.
The latest increase brings the U.S. total commercial crude inventories to 476.6 million barrels, nearing their highest levels in 80 years and around 26% higher than the same period last week.
“The slight improvement [in prices] isn’t going to last because not much has changed,” said a Singapore-based trader, adding that although China’s demand for crude has not trailed off too badly, the increasing global supply means lower prices for longer.
The market was also unimpressed by the Wednesday meeting between members and non-members of the Organization of Petroleum Exporting Countries. As mostly expected, the meeting offered no measures on reviving prices which have been down more than 40% from levels a year ago.
“Russian officials said at an OPEC arranged meeting that the production restrictions on crude output were not discussed in Vienna meeting,” ANZ Research said in a report.
In a bid to protect market shares, cash-rich oil producers such as Saudi Arabia and Russia have refused to trim output even though oil revenues have been low, leaving players with smaller coffers–such as Venezuela–eagerly lobbying for help. The anticipated resumption of Iranian oil, most likely later this year, is also exacerbating concerns of a longer global glut.
“Apart from the occasional pep talk by oil ministers, the idea has always been kept the same–maintaining market share. We would think the main reason why the stance has not changed is because this strategy is seen to be working,” said Daniel Ang, energy analyst at Phillip Futures, referring to the decreasing U.S. crude oil production.
According to the EIA, the U.S. daily production of crude last week was 9.1 million barrels, steady from a week earlier, but about 2% lower than the same period last year which had 8.9 million barrels per day.
Nymex reformulated gasoline blendstock for November  — the benchmark gasoline contract — rose 86 points to $1.2894 a gallon, while November diesel traded at $1.4581, 81 points higher.
ICE gasoil for November changed hands at $443.75 a metric ton, unchanged from Wednesday’s settlement.