Oil prices extended their rebound in Asia today, buoyed by a weaker dollar, bargain-buying and fresh speculation of a possible output cut by the OPEC producers’ group.
Traders brushed aside bearish data showing another increase in US commercial crude inventories, but analysts said any rally in a market awash with barrels of oil is bound to be short-lived.
At around 0300 GMT (0830 IST), US benchmark West Texas Intermediate crude for delivery in March was up 36 cents, or 1.12 per cent, at $32.64 and Brent crude for April was trading higher by 29 cents, or 0.83 per cent, at $35.33. Both contracts had closed higher yesterday.
The US Department of Energy had said yesterday that commercial crude stockpiles in the world’s top oil consumer soared by 7.8 million barrels in the week ending January 29.
That was almost double the market expectations and took total crude inventories to 502.7 million, topping 500 million barrels for the first time on record, exacerbating market concerns over the global glut that has depressed prices for nearly two years.
Daniel Ang, an analyst with Phillip Futures in Singapore, said prices initially dropped on the inventories surge, but bargain hunters moved in as the dollar weakened, reversing the trend.
Oil is traded in dollars so a softening of the US currency makes crude cheaper for holders of other units, perking up demand.
“When oil becomes cheaper, discount buying kicks in, pushing prices higher. So you see a bullish momentum forming,” Ang told AFP.
Comments by Ecuador, one of OPEC’s poorer members, that there might be a special OPEC meeting later this month have also revived hopes for an output cut, according to other analysts.
But Ang said any price rise must have a solid foundation, otherwise it would not last.
“The current trend now is that producers which are hurting very badly from the low oil prices would say there might be an output cut. But the countries that really have the influence are not saying anything,” he said.
“So I think we should wait for concrete movements not just hearsay.”
A price rebound last week driven by talks of possible coordination between Russia and OPEC to slash production fizzled out after traders realised there was no substance to it.