Oil prices close to 2015 highs but market remains oversupplied

Crude prices have risen around 15 percent since the beginning of April after the dip in March. (File photo: Reuters)

Brent crude oil prices opened at their highest level since February and close to 2015 highs in early Asian trading on Thursday after a near 6 percent rally the previous session, but analysts warned that the market remains oversupplied.

Oil prices jumped steeply on Wednesday after U.S. inventories built up more slowly than expected and talks between major oil producers this week triggered speculation of production cuts, although most analysts said these were currently unlikely.

Additionally, data showed that U.S. crude inventories rose less than expected last week, although hitting a record level for a 14th consecutive week, to 483.69 million barrels.

Front-month Brent crude futures opened at $62.90 a barrel on Thursday, 10 cents shy of a 2015 high, but then dipped 19 cents to 62.71 by 0215 GMT. U.S. crude opened at $55.92 a barrel, 77 cents below a 2015 high of $56.69 reached on Wednesday, and traded at $56.07 a barrel at 0215 GMT.

Despite the dip on Thursday morning, crude prices have risen around 15 percent since the beginning of April and are back to levels reached in February, which marked the 2015 highs.

Yet analysts said the market remained oversupplied due to high production and slowing demand growth, especially in China, where the economy is growing at its slowest pace in at least 6 years.

"The recent bounce comes despite a surge in OPEC crude oil production in March which is likely to have been sustained in April," ANZ bank said on Thursday.

The International Energy Agency said on Wednesday that world oil markets may take longer to tighten than initially expected due to a surge in OPEC supply and a potential rise in Iranian exports, even as demand shows signs of strength.

Energy consultancy Wood Mackenzie said the "low oil price leads to exploration budget cuts averaging 30 percent across the industry in 2015", but added that exploration cost deflation would average 33 percent, presenting an opportunity for strong explorers to increase drilling.

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Last Update: Wednesday, 20 May 2020 KSA 09:45 - GMT 06:45
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