Oil prices drop on eve of US inventories

Oil prices fell yesterday on persistent concerns about a global oversupply and caution on the eve of key US crude inventories data.

At around 1100 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May was down 64 cents at $38.75 a barrel.

Brent North Sea crude for the same month shed 86 cents to $39.41 a barrel compared with Monday’s closing level.

Last week, oil prices had snapped a five-week run of gains on the strong dollar and soaring US crude stocks that have worsened the global supply glut.

“Oil prices are beginning the new week of trading down after last week saw Brent record its first weekly loss in five weeks,” said Commerzbank analyst Carsten Fritsch yesterday.

The commodity has however seen healthy rises this month, after hitting near 13-year lows in February, thanks to a weak dollar and hopes that key producers will agree to output limits at an upcoming meeting in Doha.

With most global markets closed on Friday and Monday for Easter, trade has been limited but investors are now focusing on the weekly US Department of Energy report inventories to gauge demand in the world’s top oil consumer.

Sydney-based CMC Markets analyst Michael McCarthy told AFP that Tuesday’s price drop “does reflect the concerns about the rally that has brought us to these levels. It’s not sustainable and has run ahead of the actual recovery”.

He added: “We’ve got a huge inventory supply around the globe, not just in the US. Sustained upmoves are very hard to see and anything about $40 on the WTI is likely to be vulnerable to selling.”

McCarthy also said a pick-up in the dollar could be “the trigger for further downside” as it makes crude more expensive for buyers with weaker currencies.

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