Crude oil prices fell on May 19 as sluggish economic growth and high exports meant that markets remain oversupplied.
Brent futures were down 60 cents at $65.67 a barrel, after an almost 1% fall on May 18 on near-record Saudi exports. US crude prices received a little bit more support by rising demand ahead of the Memorial Day weekend. WTI futures were at $58.98 a barrel, down 47 cents.
Goldman Sachs said in a report that the global market imbalances are in fact not solved and the bank believes that the rally will prove self-defeating as it undermines the nascent rebalancing. It said the ongoing oversupply, upside to US production at current prices and excess capital access would be the main drivers pulling down prices. “Our supply and demand balance points to a still well oversupplied market through 2016 despite the perception of improving fundamentals,” it added.
Saudi Arabia exported 7.898 million barrels per day in March, the highest in almost a decade.
See also:Oil prices keep falling, OPEC keeps pumping
Oil prices declined on May 19 also due to the strength of the dollar. Thedollar gained versus the euroafter a senior official at the European Central Bank said the institution would “front-load” its bond-buying programme, snapping up more eurozone sovereign debt in May and June to avoid having to buy large volumes during the summer lull in July and August. A stronger dollar makes oil more expensive for buyers holding other currencies.
Moreover, investors are shrugging off fears that fighting in nations across the Middle East could disrupt oil flows.Analysts said oil markets remained oversupplied, and that the glut could worsen if US-production picked up and output by the Organization of Exporting Countries (OPEC) remained strong.
However, concerns that conflict in Iraq and Yemen could disrupt supplies remain after Islamic State militants said they had taken control of the Iraqi city of Ramadi in a big blow to the government.
In Yemen, a Saudi-led coalition resumed air strikes against Houthi militia in Aden, a port-city on the shores of key Middle East oil routes.
Meanwhile, low oil prices have hit both oil-exporting economies and countries dependant on remittances sent home by relatives working elsewhere in the region, mainly in Russia. Russia’s economy has been further weakened by sanctions imposed by the West over Moscow’s annexation of the Crimea and its role in the Eastern Ukraine conflict.
http://www.neurope.eu/article/oil-prices-fall-as-markets-remain-oversupplied/