Oil bounces after big losses but glut persists

Oil prices rallied from sharp losses on Thursday but brokers said the downtrend could resume soon as record-high stocks and worries over slowing economic growth dampened sentiment.

Brent crude oil was up 50 cents at $46.76 a barrel by 0745 GMT (03:45 a.m. EDT). U.S. crude was up 60 cents at $45.35.

“The oil market is oversupplied, OPEC production is on the rise and we had a rather bearish weekly U.S. oil stats report,” said Tamas Varga at London brokerage PVM Oil Associates.

Crude stocks in the United States fell less than expected last week, while distillate inventories rose the most since January and gasoline stocks unexpectedly increased, the Energy Information Administration (EIA) said on Wednesday.

A bearish assessment of the oil market by the International Energy Agency (IEA) on Wednesday also helped send both crude oil benchmarks down more than 4 percent by the close of trading.

The IEA said a glut in the global oil market was persistent and would put a lid on crude prices despite demand growth and declines in non-OPEC production.

“We know the process of rebalancing is taking place now, but there is still an overhang in oil and this will take time,” said Avtar Sandu, senior commodities manager at Phillip Futures.

Surging crude stocks have pushed floating storage to seven-year highs, the IEA said.

Wednesday’s U.S. data portrayed a traditionally busy summer driving season beset with unusually weak demand, when many had expected record driving trips amid lower oil prices.

The EIA said crude inventories fell 2.5 million barrels last week, less than a 3-million-barrel drop forecast in a Reuters poll.

Technical analysts say crude markets may be poised for a bigger move lower after three months of strength.

“The market moved up to $50 quite fast, so we might go down and see whether there is anything below $40,” Sandu at Phillip Futures said.

Varga at PVM said a first target for Brent could be its 100-day moving average at $44.84 a barrel, a level that could be reached in the next week.

Source: Reuters