| Pump jacks are seen at Lukoil company owned Imilorskoye oil field outside West Siberian city of Kogalym. Photo: Reuters |
LONDON – Oil prices dipped on Thursday, after hitting three-month highs this week, with analysts warning that larger gains would be unwarranted as refineries enter seasonal maintenance and a global glut weighs.
Brent crude futures were at $40.62 per barrel at 1011 GMT, down 45 cents from their last close, having earlier this week peaked at $41.48, the highest level since Dec. 9.
U.S. crude was down 34 cents at $37.95 per barrel, having hit $38.51 on Tuesday, also its highest since Dec. 9.
“Fundamentally you would expect prices to weaken from here because we’re about to head into peak refinery turnaround season,” said Virendra Chauhan, an analyst at Energy Aspects.
“We expect weakness in the physical market as demand from refineries comes off.”
Global demand for crude oil typically dips when refineries around the world enter seasonal maintenance in spring, ahead of peak summer demand.
Prices rose as much as 5 percent on Wednesday, after a big gasoline inventory drawdown in the United States overshadowed record-high crude stockpiles.
But analysts warned that a global crude production overhang of more than 1 million barrels per day (bpd) showed few signs of abating.
The focus lies on a potential agreement to rein in output between producers from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and non-OPEC exporters including Russia.
Yet beyond announced talks about freezing output near record levels – which Latin American producers said on Thursday had been delayed – no deal has been reached.
Barclays said there was no talk of a production cut during a research trip to Saudi Arabia and that the country’s goal was to maintain production levels around 10.2 million bpd over the next five years.
Most analysts expect the oil glut to last into 2017 or even 2018, resulting in low prices.
Only by 2020 is there a consensus for prices to rise towards $70 a barrel, based on low investment into production.
But this could collide with slowing demand as Deutsche Bank said China might see lower fuel demand growth from the 2020s.
“Chinese oil demand growth, the largest single contributor to world oil demand growth, may begin to flatten more quickly than some long-term projections indicate,” the bank said.
“This could result in world oil demand growth falling from its 2000-2016 trend of 1.1 million bpd year-on-year to only 800,000 bpd … by 2024.”
A slowdown in China’s oil demand would have a significant impact on crude prices as it has accounted for 37.5 percent of world oil demand growth since 2010. REUTERS
