Oil prices extend losses on looming gasoline glut

Tuesday, April 5, 2016 - 12:13 (EEST) Section: Latest news

Oil prices dropped for a third session in a row on Tuesday, as weakening demand for gasoline and persistent doubts on whether crude producers will be able to reach an agreement to rein in a worldwide supply glut dragged on the market, Reuters reported.
Growth in gasoline use has been one of the strongest pillars supporting demand across the fuel complex in both North America and Asia and has been largely credited for providing a floor under crude prices that have slumped as much as 70% since mid-2014 due surplus supply, Reuters said.
The decline on Tuesday follows data showing U.S. gasoline demand during January fell for the first time in 14 months, while overall U.S. oil demand fell 1% that month from a year ago, according to a report.
Front month U.S. West Texas Intermediate (WTI) crude was trading at $35.51 per barrel at 0652 GMT, down 19 cents from their last settlement. International Brent futures were down 9 cents at $37.60 per barrel.
”Crude prices and timespreads have weakened in recent days in line with softer fundamentals,” consultancy Energy Aspects said.
”Although Q2 is always a slow period for crude demand amidst peak refinery works, it seems like Asia may have somewhat overdone the crude buying and is therefore pausing for breath,” it said.
Analysts said crude prices could soon fall again as an emerging gasoline glut potentially adds to a global overhang in crude output that sees more than 1 million barrels of oil produced in excess of demand every day, according to Reuters.
To address the crude overhang, major producers like Saudi Arabia and Russia have proposed a freeze in output at January levels, when both pumped at or near record levels.
As is known, the Organization of the Petroleum Exporting Countries and other big producers are set to meet in Doha, Qatar in two weeks to discuss the plan.
But prospects for a deal look dim, with the Saudis declining to participate without Iran, and Russia reporting its highest output in 30 years just weeks before the meeting.