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Oil futures have rallied strongly since January
after collapsing last year but analysts say the rebound may have
overshot, and could be about to correct.
Although the U.S. oil market is becoming more balanced,
production elsewhere is still running well ahead of consumption.
"A mood change is in the air," Eugen Weinberg, global head of
oil and commodities research at Commerzbank in Frankfurt, told
the Reuters Global Oil Forum. "The oil price rally looks like it
may be slowly running of steam."
Brent for July <LCOc1> was at $66.60 a barrel by 1100 GMT (7
a.m. ET), down 10 cents from Thursday's close and trading in a
narrow 55-cent range. U.S. crude for June <CLc1> was down 32
cents at $59.56 a barrel.
Major market forecasters including the International Energy
Agency (IEA) say big oil producers in OPEC are pumping at least
2 million barrels per day (bpd) more than required, filling up
inventories from Europe to China. [IEA/M] [OPEC/M]
The U.S. government's Energy Information Administration says
world oil stocks are rising at 1.95 million bpd this quarter and
will continue to build until at least the end of 2016. [EIA/M]
Although demand for fuel is likely to pick up in the second half
of this year, the current oversupply is so great there is
unlikely to be any shortage any time soon unless there is a
major, unexpected interruption to production.
"We have an oversupply of more than 2 million bpd, almost 3
million bpd. It must weigh on the market," Weinberg said.
Thomas Pugh, economist at Capital Economics, agreed: "The rally
got ahead of itself. We think oil prices are more likely to fall
over the rest of this year than to rise."
Investors kept a close eye on rising tension in the Middle East
after Iranian vessels fired shots at a Singapore-flagged tanker
in the Gulf on Thursday.
President Barack Obama vowed on Thursday to back Gulf allies
against any "external attack," seeking to reassure them about
their security amid Arab anxiety over U.S.-led efforts to reach
a nuclear deal with Iran.
Baker Hughes will release weekly U.S. rig count data later on
Friday. The data has become a closely watched indicator to gauge
adjustments in U.S. production. [RIG/U]
(Additional reporting by Florence Tan in Singapore; Editing by
William Hardy and David Clarke)
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