business
Oil prices stable but oversupply lingers
Oil prices have bottomed out but a slowdown in economic growth and high production may prevent sharp rises. – AFP file pic, March 14, 2016.Oil prices were stable in early trading today, with global oversupply and slowing economic growth weighing on markets but prospects of falling production lending crude some support.
US West Texas Intermediate (WTI) crude futures were trading at US$38.36 (RM156) per barrel down 14 cents from their last settlement, but international benchmark Brent futures were up 3 cents at US$40.42 a barrel.
Morgan Stanley said that oil prices had likely bottomed out, but warned that a slowdown in economic growth and high production would prevent sharp rises.
"Oil prices now seem to have bottomed, even though they are likely to stay subdued for the rest of this year before starting to move higher in 2017," the US bank said.
Morgan Stanley also said that cheap oil had not provided the economic boost to growth that many had hoped for.
"When oil prices are falling below production costs, the income gains for consumers will be smaller than the costs to producers and falling oil prices become a negative-sum game," it said.
For 2016, the bank said it was "no longer looking for an acceleration in 2016 GDP growth" and that the risk of a global recession was now 30%.
Following a 70% price rout between mid-2014 and early 2016, oil markets are in flux.
Many analysts expect a modest price recovery.
The International Energy Agency (IEA) on Friday said that oil prices had likely bottomed out due to output cuts in the United States and other producers outside the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC).
Yet others warn that global overproduction - which sees over 1 million barrels of crude produced in excess of demand every day, leaving storage tanks filled to the rims with unsold fuel, will pull prices back down again just as it happened after a short rally in early 2015.
In parallel to the IEA's announcement of recovering markets, Goldman Sachs said that the recent crude price rally was premature and that prices could fall sharply in coming weeks, pulled down by record US inventory builds. – Reuters, March 14, 2016.
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