Oil falls on glut as calls for OPEC to meet draw skepticism
Refinery margins hit two-year lows on fuel supply overhang, but analysts expect no significant change to global output
Oil fell on Wednesday, hit by improved prospects for US output and a glut in refined products, while analysts largely expected no impact on supplies from talk of a potential producer meeting to discuss propping up prices.
International benchmark Brent crude futures were down 63 cents at $44.35 per barrel at 0839 GMT.
US West Texas Intermediate (WTI) crude oil futures were trading at $42.13 per barrel, down 64 cents from their last settlement.
Traders said excess supplies of crude and refined fuel products were weighing on markets, while a proposed meeting by oil producers was unlikely to result in significant market tightening.
“Oil eased lower as another round of proposed production freeze talks by OPEC failed to excite investors," ANZ Bank said.
Venezuela, a member of the Organization of the Petroleum Exporting Countries, is trying to drum up support for a producer meeting to decide measures that would buoy oil prices.
When producers last held such talks in April, Opec members failed to agree on any measures.
“Renewed attempts at verbal intervention by OPEC will help bolster oil market sentiment, although the group will struggle to rebuild its role as a backstop to Brent,” oil analysts at BMI Research said in a note to clients.
OPEC releases its monthly oil market report for July later on Wednesday. The US Energy Information Administration added to the market's unease when on Tuesday it forecast a smaller decline in US crude oil production in 2016 than it projected a month ago as drilling activity picks up.
The agency now expects US oil output to fall by 700,000 barrels per day (bpd) this year to 8.73 million bpd, compared with the 820,000-bpd drop it previously forecast.
A global products glut that has led storage tanks from Houston to Singapore to reach near capacity is also weighing on oil prices, as analysts warn that only large-scale refinery run cuts can clear the excess.
In Singapore, oil refining profits dropped to two-year lows on Wednesday, in the latest sign that the industry is pumping too much fuel for the market to absorb.
Opec to meet next month
Meanwhile, OPEC said it has called an informal meeting of member countries for next month in Algeria to help stabilise the oil market.
The Vienna-based Organization of the Petroleum Exporting Countries said in a statement that the meeting would take place on the sidelines of the International Energy Forum in Algeria from September 26 to 28.
“OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market,” it said.
OPEC President Mohammed bin Saleh al-Sada reiterated the organization’s view that oil demand will pick up in the third and fourth quarters of this year.
OPEC sees recent oil price declines and current market volatility as “only temporary” and due to weak refinery margins, an inventory overhang and the impact of Britain’s decision to leave the EU on the crude oil futures market.
An expected return of economic growth in oil-consuming countries would rekindle demand for oil in the remainder of the year while oil supply would tighten, leading to higher prices.
Sada added that more investment in oil production was needed to meet growing demand and offset declining output from existing wells.