Oil futures fell in Asian trade on Thursday, with US crude hitting the lowest level in more than two weeks, amid renewed worries of global oversupply after US crude inventories rose to a record high.
That increase came despite seasonal refinery utilisation hitting an 11-year high, while a rise in the dollar index put further pressure on oil prices.
Brent crude futures fell 36 cents to $38.90 a barrel as of 0331 GMT. It ended up 12 cents in the previous session after touching a session peak of $40.61.
The front-month contract for US crude futures dropped 46 cents to $37.86 a barrel, after dropping to $37.74 earlier, the lowest since March 16. It settled up 4 cents in the previous session following a gain of 3 per cent earlier in the session.
Prices will “zig-zag” for the rest of the year, said Tony Nunan, oil risk manager at Japan's Mitsubishi Corp.
US inventory up
US crude stockpiles rose by 2.3 million barrels to 534.8 million barrels in the week to March 25, the seventh week at record high levels, data from the US Energy Information Administration shows.
But the increase was less than analysts' expectations of a 3.3 million barrel build after crude imports fell 636,000 barrels per day to 7.4 million bpd.
Refinery crude runs rose by 414,000 barrels per day (bpd) and refinery utilisation rates rose 2 percentage points to 90.4 per cent of total capacity, the highest seasonal rate since 2005.
Crude prices, which have risen about 50 per cent since mid-February, have started to track lower in the past week.
May find support at $35/barrel
“Oil prices will trend down again ... $35 a barrel will be the support level. Low prices are not sustainable in the long-run,” Nunan said.
But with OPEC flagging a price of $50 a barrel and oil producers scheduled to meet in Doha on April 17 to discuss a possible output freeze, prices are likely to remain range-bound.
“Anytime prices get close to $45-$50 a barrel, funds that have taken long positions are likely to take profits. Unless things really ignite the global economy, then people will sell-off at that level,” Nunan said.
In Asia, sustained weakness in oil prices is continuing to supress upstream oil and gas production activity, consultancy BMI Research said in a report on Thursday.
Weaker oil prices are “limiting opportunities to stem natural declines in ageing assets and bringing new production sources online,” the report added.
OPEC output rises
Concerns over global oversupply were further fuelled after crude output from the Organization of the Petroleum Exporting Countries (OPEC) rose in March to 32.47 million bpd from 32.37 million bpd in February, according to a Reuters survey based on shipping and other data.
Iran is expected to add half a million barrels of oil supply a day within a year from existing oilfields after sanctions were lifted in January, Fatih Birol, the head of the International Energy Agency told Reuters on Wednesday.