Oil prices edge up in early trading but outlook remains weak

Reuters News
Posted: Jan 20, 2015 9:04 PM

By Henning Gloystein

SINGAPORE (Reuters) - Oil prices edged up in early Asian trading on Wednesday in a further sign that prices are receiving support around current levels, but analysts said the outlook for the next six months remained weak due to oversupply.

Oil fell as much as 5 percent on Tuesday after the International Monetary Fund cut its 2015 global economic forecast and key producer Iran hinted prices could drop to $25 a barrel without supportive OPEC action.

Prices stabilised on Wednesday morning, with traders pointing to buying this week whenever benchmark Brent crude oil dropped towards $48 a barrel.

Brent crude was trading at $48.30 a barrel at 0144 GMT, up 31 cents from its last settlement, while U.S. crude was up 38 cents at $46.85 a barrel.

But analysts said the expectation for the next half year was for continued low prices.

"We see little scope for avoiding a large stock build in 1H15 and therefore anticipate weak prices ... Commodity price strength is inversely related to the dollar. With the U.S. in monetary tightening mode and Europe and Japan in an expansive phase, an expected stronger dollar will create headwinds for any upward oil price improvement," BNP Paribas said in a note overnight.

"But 2H15 should see start of a price improvement, the scale of which will be tied to the extent to which demand and U.S. supply respond to price."

(Editing by Joseph Radford)