Oil Prices Rise Ahead of Key U.S

Oil prices rose on Wednesday in volatile trade ahead of key USA supply data but the global oversupply of crude continued to weigh on the market.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March fell below the $30 mark overnight and traded at $29.68 a barrel at 0230 GMT, down $0.20 in the Globex electronic session.

Brent for April settlement dropped US$1.52, or 4.4 per cent, to US$32.72 a barrel on the London-based ICE Futures Europe exchange yesterday.

“With a build of about 4.0 million barrels expected, that’s another event that traders are expecting could push oil prices down”, Michael McCarthy, chief market strategist at CMC Markets, said, referring to the closely-watched U.S. inventory data.

US production will drop by 620,000 barrels a day, or about 7 percent, from the first quarter to the fourth, according to the Energy Information Administration.

Oil prices halted their rise in Asia Monday, hurt by the strengthening United States currency which makes the dollar-price commodity more expensive.

“U.S. shale should take the hit, that’s where you will see cuts and supply should start to taper off”, Daniel Ang, an investment analyst at Phillip Futures, said by phone from Singapore. The European benchmark crude ended the session at a premium of $1.11 to WTI for April.

Long-term oversupply concerns, pessimistic sentiments of a Chinese slowdown, and record global inventory will continue to put pressure on crude oil prices.

Implied crude stocks are set to climb by 1.1 million barrels per day this year, compared with an implied stock build of 1.3 million bpd last year, the note said.

But Goldman Sachs said it was “highly unlikely” the Organization of the Petroleum Exporting Countries would cooperate with Russian Federation to cut output, saying such a move would also be self-defeating as stronger prices would bring previously shelved production back to the market. Crude oil prices could see support at $25 per barrel.

Prices may surge about 50 percent by the fourth quarter as US crude output declines, according to the median of 17 estimates compiled by Bloomberg this year.