Crude oil futures edged away from their lowest in more than two months on Friday, lifted by a dip in OPEC production, although swelling US stockpiles triggered by ongoing oversupply kept the market outlook bleak.
A 256,000 barrels-per-day (bpd) fall to 31.38 million bpd in output by the Organization of the Petroleum Exporting Countries (OPEC), helped to lift internationally traded Brent by 28 cents from its last settlement to $44.34 per barrel by 0800 GMT. Still, the contract remained close to August lows.
US crude was at $41.75 a barrel, flat to its last settlement and also close to August lows. The benchmark had closed down on Thursday almost 3 per cent on a 4.2 million-barrel rise in US crude inventories.
There were signs that traders expect more price falls, with the number of options taken to sell crude if prices fall to $40 or even $25 per barrel soaring.
“Fundamentally, it is hard to argue with the recent price action,’’ ANZ bank said on Friday, referring to a 20 per cent fall in oil prices since early October.
“The trend is ... down. It looks very bearish,’’ said Oystein Berentsen, managing director of crude oil at Strong Petrochemical in Singapore.
Oversupply
Despite the dip in output, OPEC said it expected an oil surplus to extend into 2016, albeit at a lower rate than this year.
OPEC’s second-largest producer, Iraq, plans to export 2.90 million bpd of Basra crude from its southern oil terminals in December, trade sources said on Friday.
Bloomberg Commodity Index
Oil is not the only commodity caught in a downturn. The traded Bloomberg Commodity Index fell below 83 points this week to level not seen since 1999, and it is down 40 per cent since the oil rout began last year.
Oil markets have been dogged by oversupply, estimated between 0.7-2.5 million bpd being produced above demand, which has resulted in prices falling by almost two-thirds since June 2014.
The glut is a result of high production by most major producers, including OPEC, Russia and North America.
Jefferies bank said that it expected the crude glut to spill into the refined products sector.
“We... expect the focus of the oil markets to shift to the surplus of refined products, and OPEC highlighted the 210 million barrel inventory overhang in the OECD relative to the five-year average,’’ it said.
On the demand side, an economic slowdown in Asia, led by the region’s two biggest economies China and Japan, has led to concerns about slowing demand, although consumption has so far held up.