SINGAPORE – Oil prices edged up in Asia on Monday as the dollar weakened while bargain-buyers moved in following a recent sell-off. However, analysts have warned that a global supply glut and weak demand will temper the gains.
Prices hit three-month lows last week after US data showed an unexpected increase in commercial stockpiles of oil and gasoline, adding to worries about a global crude supply glut.
News that the US economy grew slower than expected in April-June also raised questions about demand in the world’s biggest oil consumer.
However, the weak reading narrowed the chances of a US interest rate hike this year, sending the dollar tumbling, making oil cheaper for anyone using other currencies.
At about 0410 GMT, US benchmark West Texas Intermediate for October delivery, a new contract, rose 15 cents, or 0.36 percent, to $41.75, and Brent was up 15 cents, or 0.34 percent, at $43.68.
But analysts said the uptick was unlikely to be sustained. “There is a clear downward momentum to the market at the moment,” Michael McCarthy, chief strategist at CMC Markets in Sydney told Bloomberg News.
“There are concerns about the oversupply situation continuing. Clearly $40 a barrel is a key point for West Texas and I’d expect to see support there given the bounces we’ve seen previously at that level.”
Sanjeev Gupta, an oil and gas analyst with EY, added that “crude oil prices continued to remain under pressure due to concerns over slower economic activity in the US, high inventory levels of crude and finished products, and media reports of higher output from OPEC in July.”
Energy information provider S&P Global Platts said production from the Organization of the Petroleum Exporting Countries surged to 300,000 barrels per day in June, close to an eight-year high.