Oil steady as supply glut offsets robust demand
Brent crude oil was stable on Wednesday as strong demand was unable to lift prices in an oversupplied market.
Brent futures were up 6 cents at $63.76 a barrel at 0738 GMT. Front month U.S. crude futures were up 12 cents at $60.09 per barrel.
A glut of oil in the Atlantic basin has seen oil traders leave full tankers floating on the sea, in some instances for months.
An expected fall in U.S. crude production due to the relatively high cost of producing shale has prevented further weakness.
J.P. Morgan said in its weekly oil research note that U.S. production had reached a new high this week, but that it would start to drop.
"There are so many tankers floating for prompt delivery that people will want to see the fall in shale production, rather than predictions of a decline before it will give much support," said Maarten van Mourik, an independent oil economist in Paris.
Investors will closely watch stock data for clues on whether strong U.S. demand will do enough to alleviate the surplus.
U.S. crude stocks are forecast to have fallen 1.7 million barrels last week, according to a Reuters poll of analysts. Gasoline stocks are expected to be down 300,000 barrels.
U.S. crude stocks fell last week even as refineries cut output, while gasoline inventories decreased and distillate stocks built, data from industry group the American Petroleum Institute showed on Tuesday.
U.S. Energy Information Administration (EIA) data published this month shows that global petroleum oversupply has more than doubled to a record 2.6 million barrels per day (bpd) since the end of the second quarter of last year, when one of history's biggest oil price routs started.
Despite this, some analysts say they expect prices to rise somewhat going into the second half of the year as demand is strong and stocks are seen falling.
"Fundamentals are at an inflection point and will improve from here with high refinery runs this summer and sequentially declining U.S. crude production. As crude stocks erode, prices will gradually strengthen," said U.S.-based Pira Energy.
Strong U.S. fuel demand, this week's tropical storm, recent Canadian wildfires that led to the closure of oil production as well as ongoing stock withdrawals have resulted in U.S. prices outperforming international Brent contracts, pulling down Brent's premium to January lows of around $3 per barrel
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- June 17, 2015
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