prices rise, but rattled markets, gloomy outlook curb
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[February 09, 2016]
By Amanda Cooper
LONDON (Reuters) - Oil prices rose on
Tuesday, clawing back some of the losses from a sell-off across broader
financial markets, but a report showing supply will not drop quickly
enough to erode a global surplus tempered gains.
The world will store unwanted oil for most of 2016 as declines in
U.S. output take time and OPEC is unlikely to cut a deal with other
producers to reduce ballooning output, the International Energy
The agency cut its forecast for 2016 oil demand growth, which now
stands at 1.17 million barrels per day (bpd) following a five-year
high of 1.6 million in 2015, and reduced its estimate of demand for
"The key issue in the market is the point in time at which supply
and demand balance once more, and what we're seeing here is the IEA
are suggesting that will be pushed further into the future," BNP
Paribas strategist Gareth Lewis-Davies said.
"The period where you have to erode the overhang, once markets start
to draw (down) is going to be longer, so it feeds into the narrative
of a low oil-price environment for longer than they had been
Brent crude futures were last up 37 cents at $33.25 a barrel by 6.52
a.m. ET, down from Monday's session high of $34.68. U.S. futures
were up 54 cents at $30.21.
Financial markets have been rattled in the last week by concern
about banks given signs of a potential global slowdown, prompting
buying of perceived safe-haven assets such as gold, German Bunds and
the Swiss franc.
Oil, which had gained nearly 30 percent in the two weeks to early
February, breaking above $35, has receded, in line with a retreat in
stocks and industrial commodities.
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Echoing the view of the IEA, a Reuters survey showed U.S. crude
stocks likely rose by 3.9 million barrels in the week ended on Feb.
5, meaning global oversupply is unlikely to abate any time soon.
"The fundamentals haven't shifted. The market remains in surplus,
and while that's the case, it is very difficult for prices to
sustain any gains," said Michael McCarthy, chief market strategist
at CMC Markets in Sydney.
There is also little sign of any coordination on production cuts
among big producers outside the United States after weekend talks
between OPEC members Saudi Arabia and Venezuela yielded no concrete
(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale
Hudson and Mark Potter)
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