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Oil slips from month highs as glut weighs

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Reuters LONDON
Last Updated : Oct 12 2015 | 8:28 PM IST

By Christopher Johnson

LONDON (Reuters) - Oil prices retreated from their highest levels in more than a month on Monday as investors took profits after several days of sharp gains and oil markets remained over-supplied despite talk of stronger demand next year.

Oil has been on a roller-coaster ride over the last few weeks, recovering from six-year lows. North Sea Brent crude dropped to almost $42 a barrel in August, from a peak above $115 in June 2014, but then rallied back to an intraday high of $54.05 on Friday.

Evidence that oil producers are reducing output in response to low prices has helped make sentiment more positive and many traders and analysts now expect prices to be higher next year as global fuel demand recovers.

But the upswing appears to have been too fast, analysts say, adding that heavy technical selling had set in.

"The recent rise has left room for profit-taking," said Carsten Fritsch, senior oil analyst at Germany's Commerzbank.

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"Sizeable net long positions have made the market vulnerable to a sell-off." [O/ICE]

Benchmark Brent crude was down 70 cents a barrel at $51.95 by 1420 GMT after reaching an earlier high of $53.31.

U.S. light crude was down 80 cents at $48.83.

Data from oil services company Baker Hughes on Friday showed U.S. energy firms cut oil rigs for a sixth week in a row last week in a sign low prices are keeping drillers away from the well pad.

Drillers removed nine oil rigs in the week ended Oct. 9, bringing the total rig count down to 605. Since hitting an all-time high of 1,609 a year ago, the number of U.S. rigs operating has fallen by an average of 20 a week.

OPEC forecast on Monday that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits U.S. shale oil supplies. [OPEC/M]

"This should reduce the excess supply in the market and lead to higher demand for OPEC crude," OPEC said in the report, "resulting in more balanced oil market fundamentals."

But the producer group is now producing much more oil than required by the market and oil stockpiles are still rising.

"We think that prices are likely to remain capped to the upside for the remainder of this quarter," Barclays said.

(Additional reporting by Henning Gloystein in Singapore; Editing by William Hardy and Mark Potter)

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First Published: Oct 12 2015 | 8:13 PM IST

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