Oil futures moved away from two-month lows on Tuesday as a brief halt in Iraqi crude loadings threatened to tighten supplies, but a drop in bullish bets by investors kept a lid on price gains.
Brent crude was at $46.72 per barrel at 0712 GMT, up 47 cents or 1 percent from their last close and off a low of $45.90 hit in the prior session. U.S. West Texas Intermediate crude was up 37 cents at $45.13 a barrel.
Traders said the rise was largely a result of the brief suspension of tanker loading of Basra Light crude at two export terminals in Iraq’s south after a pipeline leak.
Although loadings resumed overnight, Iraq plans to cut crude oil exports from its southern ports to 2.79 million barrels per day (bpd) in August from 2.99 million bpd planned for July, a preliminary loading program showed.
Oil markets also drew support from an ongoing uncertainty over production in Nigeria after rebels claimed they had attacked facilities of Exxon Mobil Corp, a claim the U.S. oil giant dismissed.
Despite this, a global oil glut seems far from over.
Saudi Arabia’s energy minister Khalid Al-Falih told German newspaper Handelsblatt that there was still excess oil in storage around the world and that it would take a long time to reduce the overhang.
A similar view seems to be gaining traction in financial markets, where following strong gains in oil prices in the first half of the year banks and funds are increasingly betting on a drop, or shorting the crude market, moving away from long positions that benefit from price rises.
This has contributed to an over 12 percent plunge in Brent prices from their June peak above $52 – the highest this year.
Hedge funds and other money managers cut their bullish bets on crude by 22 million barrels over the seven days ending on July 5. These players have cut their net long positions in crude futures and options by almost a quarter, from 633 million barrels to 485 million, over the last four weeks.
“Oil prices continued their period of weakness as investors remained concerned that increasing exploration activity in the U.S. would see U.S. production and inventories remain high,” ANZ bank said. “Signs of an end to several supply disruptions and a stronger U.S.-dollar also played their part in keeping sentiment bearish.”
Physical markets were also weak, with Asian oil refiners processing less crude as they grapple with margins that plunged to five-year lows after the region was flooded with supply of refined products and as slowing economic growth hits demand for fuels.
Source: Reuters
