Oil prices dip as traders cash in on two-week price rally

Oil prices edged away from 5-week highs on Tuesday, with traders cashing in on a 16 per cent rally since early August that has largely been fuelled by talk of producers taking action to prop up the market.

International Brent crude oil futures were trading at $48.14 per barrel at 0055 GMT, down 21 cents from their previous close. Despite the dip, prices remained over 15 per cent higher than the monthly $41.51 per barrel low from August 2.

US West Texas Intermediate crude was trading at $45.56 a barrel, down 18 cents from its previous close, but still over 16 percent above its $39.19 monthly low from August 3.

 

Traders said the price falls were the result of cashing in following more than two weeks of rallying prices.

The previous gains had been driven by producer talk of reining in ballooning oversupply.

"Crude oil rose to a four-week high as speculation continued to mount that OPEC would discuss a potential cap on production at an upcoming meeting between the members of the group. Russia joined in, saying it was open to such talks as well," ANZ bank said.

Led by top crude exporter Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC), has re-launched a debate about oil producers potentially capping soaring output in an effort to reduce a global overhang in production and storage of crude oil and refined fuel products.

Analysts said that concerns over oil production in Venezuela were also impacting markets.

"News of an imminent collapse in oil output from Venezuela also supported prices," ANZ said.

Venezuela, which holds the world's largest crude oil reserves, is on track to suffer its steepest annual oil output drop in 14 years as it struggles with an economic and political crisis and years of underinvestment and mismanagement.

In the 12 months to June, Venezuela's crude output fell 9 per cent to 2.36 million barrels per day (bpd), and internal trade and supply data seen by Reuters show that state-controlled oil firm PDVSA's crude exports, which account for 94 per cent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures.