As oil rallies, physical market suggests ample supply
Published on Fri, Mar 12, 2010 at 08:59 | Source : Reuters
Updated at Fri, Mar 12, 2010 at 11:06
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As oil rallies, physical market suggests ample supply
Oil has rallied to within sight of its 2010 high this week, but the physical crude markets in Asia and Europe are telling a more bearish story about oversupply and sluggish demand.
Oil has rallied to within sight of its 2010 high this week, but the physical crude markets in Asia and Europe are telling a more bearish story about oversupply and sluggish demand.
The contrast between the oil price , which topped USD 83 a barrel on Wednesday, and signs of weak physical markets might preoccupy OPEC when it meets on March 17 and raise the issue of whether markets have too much oil.
"If you get on the ground and look at the fundamentals, you see too much crude oil production by OPEC," said Paul Tossetti, senior energy adviser at PFC Energy.
Russian crude prices have weakened and top oil exporter Saudi Arabia cut Asian oil prices to 14-month lows for April, while the Organization of the Petroleum Exporting Countries pumped the most oil in over a year in February.
OPEC is targeting Asian demand growth and members are mostly supplying customers there with full volumes even as they maintain curbs to Europe and the United States. Even so, the market is struggling to absorb the crude, traders said.
"OPEC members are very bullish but they are all focusing on the one market in the world where there is growth. How much more crude can Asia absorb?," said a trader at an oil company.
Weakness in demand elsewhere, especially in developed countries, showed little sign of abating.
"In the end, governments still need to get people back to work. Housing markets are still weak," said a senior trader with an oil major. "Until that happens, how much more demand are we going to see?"
