Oil drops as glut woes return

Oil drops as glut woes return

Oil drops as glut woes return
World oil prices slid today on traders' thoughts returned to the stubborn oil glut that has plagued the market for months.

At about 1230 GMT, US benchmark West Texas Intermediate for delivery in December was down 40 cents at USD 41.34 per barrel.

Brent North Sea crude for January delivery slid 31 cents to USD 44.25 a barrel. "The oil market remains amply supplied at the moment," said Gain Capital analyst Fawad Razaqzada.

Crude futures had pushed higher yesterday as France intensified a bombing campaign against the Islamic State group in Syria in retaliation following the deadly attacks on Paris last Friday.

The oil-market gains reversed a steady decline since November 5, mostly driven by signs that major producers were not cutting back, and by mounting stockpiles especially in the United States, in part due to the very mild fall weather.

"The general improvement in risk appetite is part of the reason why oil bounced back on Monday, especially since prices were severely oversold," added Razaqzada.

"Today, traders are realising that fundamentally nothing has changed. "The French bombardment of IS targets are on the main away from most major oil terminals, and therefore they are unlikely to cause any actual disruptions to supply.

"So, oil prices continue to remain depressed by the still-high supply of the stuff and weaker demand prospects."

Friday's devastating attacks on Paris, blamed on the Islamic State group, also stirred expectations of a rise in the level of conflict in the Syria-Iraq region that some fear could disrupt oil output.

In addition, crude oil prices tend to rise in times of geopolitical turmoil because the commodity is often regarded as a safe store of value.

"Due to the intensifying demand for oil amidst times of uncertainty, oil prices historically increase due to global conflict," added Jonathan Sudaria at London Capital Group.

"With key inventory data ahead and suspicions of oversupply, momentum could be handed back to bears," he added, in reference to investors who bet on the market heading lower.

The US government's Department of Energy will release its regular weekly oil inventories report tomorrow.

Get a round-up of the day's top stories in your inbox

Check out all newsletters

Get a round-up of the day's top stories in your inbox