Oil prices ease on supply glut

In October, a major Polish refinery began importing crude oil from Saudi Arabia, puncturing Russia’s monopoly.

World oil prices rose this week on concerns that heightened geopolitical tensions could disrupt Middle East supplies despite a market awash with crude.

Brent crude fell by 5 cents (U.S.) to $45.41 per barrel by 1311 GMT, after settling down 71 cents at $45.46 in the previous session. An increase in tensions could also affect oil shipments: according to the US Energy Information Administration, 2.9 million barrels of crude oil per day were transported through the Bosporus from the Caspian Sea to the Mediterranean in 2009.

Stats from the American Petroleum Institute (API), the first of the weekly inventory reports, showed a further 2.6mln barrel increase in the surplus.

“Inventory overhangs dominate the oil markets and will likely suppress oil prices in the near term, as we approach [the December] OPEC meeting in Vienna”, said Jason Gammel, analyst at Jefferies.

Futures were little changed in NY after climbing 0.4 percent Wednesday.

The size of hedge funds’ shorting positions against the oil price has reached a peak for this year, ahead of next week’s OPEC meeting.

The Wolfe analysts said they are concerned their bearish forecast for US oil at $58 a barrel in 2016 is too high.

This week’s oil price falls were capped by the shooting down of a Russian fighter jet on the Syrian border by Turkey.

While U.S. crude stocks as a whole rose by less than 1 million barrels, the Cushing, Oklahoma, delivery hub for WTI futures (USOICC=ECI) alone had a 1.74 million-barrel build, the EIA said. It traded as low as $44.80 earlier in the session.

Increasing oil prices will simply incentivise producers to clamour back into the market to restart production worsening any potential supply glut.

The dollar index, which measures the greenback against a basket of currencies, gained 0.02 percent at 99.813, making the currency-denominated oil futures more expensive to other currency holders. Additionally, primary aluminium (up 0.2%), nickel (up 4.0%), zinc (up 2.9%) and lead (up 2.2%) futures posted upticks as well.

Gold has pared gains, after an initial flow of safe-haven buying following the attacks in Paris slowed down and investors’ focus returned to expectations for the US Federal Reserve to raise interest rates in December.