Oil rises after month of steady decline but oversupply still weighs

Oil rose on Monday, driven by new orders as traders staked out positions at the start of the new month, but the market remains dogged by a crude glut, a flood of refined products, and an economic slowdown.

Brent crude was at $43.74 per barrel at 0650 GMT (2:50 a.m. ET), up 21 cents from its last close in July, when it lost 12 percent over the month.

U.S. West Texas intermediate was at 41.70 per barrel, up 10 cents from July’s last close. WTI shed 13 percent in July.

“Oil prices rose on the day but appear vulnerable to concerns of oversupply,” ANZ bank said, with traders pointing to an influx of new orders with the start of August acting as price supporters.

However, a global glut still weighs: “Demand growth remains lackluster and has not made significant inroads to clear the inventory overhang for oil,” Barclays said.

“With the macroeconomic picture worsening and Saudi Arabia unlikely to exhibit much restraint…, refineries are going to find themselves in the line of fire,” the bank said and added that low refinery margins would likely result in run cuts.

China Aviation Oil, Asia’s biggest jet fuel supplier, said on Friday that it was concerned about the economic environment and its impact on fuel demand.

“(The) macro-environment may remain persistently challenging as concerns over demand-supply and economic uncertainty post-Brexit could create volatility in the oil trading environment.

South Korea, Japan, China and Vietnam on Monday reported weak manufacturing and trade data, stoking concerns that Asia’s leading economies were in a sharp slowdown.

The weakness is also showing in physical oil markets.

Benchmark Dubai crude, as quoted by price agency Platts, averaged $42.465 a barrel for July, the lowest since April.

Top exporter Saudi Arabia slashed the September price for its light crude for Asian customers by $1.30 a barrel ahead of an expected fall in demand in October when about 1 million barrels per day (bpd) of refining capacity in Asia will be shut for maintenance.

Output from the Organization of the Petroleum Exporting Countries (OPEC), helped by a jump in Iraq exports, in July likely reached its highest in recent history, at 33.41 million bpd from a revised 33.31 million bpd in June.

In Libya, oil might re-open soon following a deal between the U.N.-backed government and an armed force, The country is aiming to boost exports to 900,000 bpd by the end of the year.

In the United States, drillers last week added rigs for a fifth consecutive week as part of the biggest monthly rig count increase in over two years, adding three oil rigs to a total of 374.

Source: Reuters