Brent crude oil futures edged higher yesterday, holding above $48 a barrel as analysts said prices were well supported around current levels, although few expect a strong rebound anytime soon as global output continues to outweigh demand.
Benchmark Brent crude futures were trading at $48.38 per barrel at 0802 GMT, up 11 cents since their last settlement. US crude was trading at $46.50 a barrel, up 25 cents.
“Our forecast seems to point towards a consolidation stage in the weeks to come,” Phillip Futures said in a note. “Therefore, we expect crude prices to trade range bound between $44.75-$50.69 for WTI March 2015 and $46.4-52.89 for Brent March 2015.”
Despite the slight price gains, oil was trading in a wobbly market after Switzerland jolted markets already roiled by plunging commodities prices by abandoning its currency cap on Thursday. The move triggered the euro’s biggest one-day drop fall against the Swiss franc in history and an 11-year low against the US dollar.
Oil markets remain dominated by oversupply
Investors took this as a sign that the European Central Bank would launch large-scale bond buying next week, which points to further euro falls against the dollar.
“The potential dollar strength into 2015 may be another factor at play in pressuring oil prices lower. The weakness in the crude space is likely to keep sentiment jittery,” Singapore’s OCBC bank said yesterday.
Oil markets remain dominated by oversupply – created by soaring US shale output and high production from OPEC members and Russia – amid slowing demand.
Crude oil prices have been pulled lower by multiple factors, OCBC said, starting back in July 2014, when oversupply from major oil producers spooked the market.
“In contrast, demand stayed tame, with European and Indian demand trending in the contraction zone,” it said.
Even in China, Asia’s biggest economy and the region’s main driver for growth, there are signs of weakness as the central bank yesterday announced fresh support measures after data showed a worrying drop in bank lending and foreign investment growth falling to a two-year low.