Upside for oil prices to be limited over rest of year

The EIA’s recent weekly US Petroleum Report have provided some small amount of support to oil prices, which have been weaker since spiking after last week’s surprise fall in stock, Thomas Pugh, commodities economist at British economic research and consulting company Capital Economics said in a report obtained by Trend.

“However, stocks are still enormous and any downward trend in US oil production is in no way certain yet. This should limit the upside for prices over the rest of this year,” Pugh’s report said.

The EIA’s weekly US Petroleum Report, released on Monday 13, shows the amount of
crude oil in commercial storage tanks decreased by about 2.2 million barrels to 484.8 million.

This was the second consecutive fall and went against analysts’ expectations of a 0.4 million barrel increase, although it was about the same as the 2 million barrel decline estimated by the American Petroleum Institute (API), an industry
body, yesterday, Pugh said in the report. Meanwhile, stocks of gasoline fell by 1.1 million barrels to 226.7 million, after rising for the last two weeks.

“A further fall in US weekly oil stocks suggests that April’s highs marked the peak. However, if the drawdown continues at the current rate it will take another year before stocks are back to more normal levels,” Pugh said.

Economist said that not all the data in the report were bullish for prices.

“US oil production rose slightly last week and the amount of crude oil used by refineries fell. More generally, based on their previous relationship with US oil prices, the decline in the number of active drilling rigs looks overdone and we expect it to start to rebound over the next few months,” ugh said in a report.

Oil prices fell Wednesday as traders assessed a drop in U.S. crude inventories and a continued oversupply in the global market, the Wall Street Journal reported.

Light, sweet crude for June delivery settled down 25 cents, or 0.4 percent, to $60.50 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, fell five cents, or 0.1 percent, to $66.81 a barrel on the ICE Futures Europe exchange.

/By Trend/