Oil bounces off 10-month lows; crude glut still weighs

Energy firms once again sank in Asian trade Thursday after another plunge in oil prices as glut fears return, though most regional markets enjoyed a recovery from the previous day’s sell-off.Brent crude futures were up 43 cents at US$45.25 a barrel at 1229 GMT, after falling as low as US$44.53 earlier in the day.Brent crude oil fell as low as $44.64 in early trading, its lowest since November a year ago.US crude futures ended up 21 cents a barrel at $42.74 a barrel. Meanwhile, US benchmark WTI crude fell to $42.36, its lowest since last August.At a time when the market experts are blaming the expanding USA oil supply for the delay in the rebound of oil prices, the latest data from the OPEC’s Monthly Oil Market Report (MOMR) indicates that the cartels’ oil production, which was supposed to decline as per its agreement, has grown by 336 thousand barrels per day (kbpd) for the month of May. Market analysts were anticipating deeper cuts and crude oil prices have been on a steady decline since the start of June. “It bought into it because it was a shift in strategy from OPEC and it gave the market hope”, said Matt Stanley, fuel broker at Freight Investor Services in Dubai.Michael Hewson, chief market analyst at CMC Markets, says in an email: “The declines seen in the past few weeks really shouldn’t have been too much of a surprise to OPEC given the capacity of United States shale producers to vacate the space left open for them”.US crude imports rose last week by 56,000 barrels per day.Even Saudi Arabia’s decision to replace Muhammad bin Nayef with Mohammad bin Salman as crown prince didn’t sway the market, which is presumably a disappointment to the kingdom: as CNBC reported, Amrita Sen, chief oil analyst at Energy Aspects, pointed out the Saudis need higher prices to bolster the value of their initial public offering of their national oil and gas company, Aramco.The two-year slump in global oil prices, which saw Brent crude prices bottom out at close to US$28/b in January 2015, had a dramatic effect on U.S. shale producers. Currently, the USA crude oil inventory stands at 1,196 million barrels, which is similar to what it was at the same time previous year.West Texas Intermediate for August delivery was at $42.56 a barrel on the New York Mercantile Exchange, up 3 cents, at 7:47 a.m.in London. Berentsen said that unless OPEC deepened cuts or there was a large, unexpected production stoppage, prices will remain low.”Expanding US shale production continues to dilute the efforts by Opec and Russian Federation to stabilise the market”. If the rig count simply held steady at this level, Goldman Sachs said that production across the major shale plays would rise by 770,000 barrels a day from the fourth quarter of last year and the fourth quarter of this year.