Oil prices rose in Asian trading Tuesday as bargain hunters sprung into action after further weakness overnight sent futures to their lowest level since late March.
The near-1% decline more than reversed modest strength seen in Asian trading Monday and largely reflected recent investor concern about the strength of rebounding U.S. oil production and ebbing faith that the Organization of Petroleum Exporting Countries can effectively lead the market back into balance after several years of oversupply.
"Until OPEC announces an official decision on whether to extend the production cuts, the main focus of the market will be on that," said Nelson Wang, an energy analyst at CLSA. He added, as others have said, that failure to deliver an extension that is also agreed to by major non-cartel producers such as Russia could result in a steep price decline.
Concerns of a still-bloated market has resulted in benchmark U.S. oil futures falling for six-straight sessions, dropping a cumulative 7.4% during the streak.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June recently traded up 0.5% at $49.45 a barrel in the Globex electronic session. June Brent crude on London's ICE Futures exchange rose 0.5% to $51.88.
Analysts say the recent downdraft may persist as U.S. oilfield-service companies, namely drillers, still have plenty of spare capacity. Mr. Wang estimates only around 70% of available oil rigs in the U.S. are currently in operation despite persistent growth this year in drilling activity there. The closely watched rig count by Baker Hughes is at its highest level in nearly 2 years.
"This means there is a lot of upside risk to U.S. supplies," he said.
Meanwhile, geopolitical factors are helping to lift oil prices. North Korea celebrates the 85th anniversary of the foundation of its Korean People's Army on Tuesday, and the nuclear weapon-equipped country has a history of conducting missiles tests on this day.
"If it happens, who knows what President Trump will perceive it as," said OCBC economist Barnabas Gan.
Nymex reformulated gasoline blendstock for May--the benchmark gasoline contract--was recently up 0.5% at $1.6293 a gallon, May diesel gained 0.6% to $1.5513 and ICE gasoil for May rose 0.4% to $467.75 a metric ton.
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(END) Dow Jones Newswires
April 24, 2017 23:52 ET (03:52 GMT)