Oil futures fell in Asian trade on Thursday, with U.S. crude hitting its lowest level in more than two weeks, amid renewed worries of global oversupply after inventories in the United States rose to a record high.
That increase in U.S. crude oil stocks came despite seasonal refinery utilisation hitting an 11-year high, with a rise in the dollar index .DXY put further pressure on oil prices.
Brent crude futures LCOc1 fell 26 cents to $39 a barrel as of 0710 GMT. It ended up 12 cents in the previous session after touching a session peak of $40.61.
The front-month contract for U.S. crude futures CLc1 dropped 43 cents to $37.89 a barrel, after dropping to $37.74 earlier, the lowest since March 16. It settle up 4 cents in the previous session following a gain of 3 percent 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.
U.S. 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 U.S. Energy Information Administration shows.
The increase was less than analysts’ expectations of a 3.3 million-barrel build after crude imports fell 636,000 barrels per day (bpd) to 7.4 million bpd.
China’s still growing demand – although at a slower pace – should help to offset the declines in U.S. oil intake figures.
China is set to import 7.5 million bpd this year, overtaking the U.S. as the world’s biggest crude importer, Zhong Fuliang, Vice President of Unipec, trading arm of Sinopec told a seminar on Thursday.
Crude prices, which have risen about 50 percent since mid-February, have started to track lower in the past week.
“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 suppress 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.
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.