Oil rebounds in Asia on bargain-hunting

A woman waits beside a taxi fuelling up at a Sinopec gas station in Beijing. AFP FILE PHOTO

SINGAPORE – Oil prices rebounded in Asian trade Thursday on bargain-hunting following an overnight decline, but analysts said a surprisingly large build in US stockpiles would continue to stoke demand concerns.

New York’s main contract, West Texas Intermediate (WTI) for delivery in December, was up 54 cents at $97.40 in mid-morning trade, rebounding after hitting its lowest closing price since June 28 on Wednesday.

Brent North Sea crude for December delivery gained four cents to $107.84 after falling $2.17 overnight.

“Oil has rebounded simply because the drop overnight was very steep, and there’s been quite a bit of buying this morning,” Victor Shum, managing director at IHS Purvin and Gertz in Singapore, told AFP.

“The price decline in the past few days was caused by the rise in inventories, and the prospect for US demand remains weak with concerns in the market about the impact of the government shutdown on US GDP,” he said.

The US government’s Department of Energy weekly survey Wednesday showed that American crude reserves had soared by 5.2 million barrels in the week ending October 18.

The increase also came on the heels of a Monday report for the prior week, delayed by the partial US government shutdown, that showed another big rise in US inventories.

A rise in stockpiles indicate weak demand in the world’s biggest economy and oil consuming nation, putting downward pressure on prices.

Brent, the European benchmark traded in London, meanwhile remained supported by Middle East supply concerns, according to analysts.

“While the near-term sentiment for WTI looks weak, Brent will continue to be steady due to reports that the diplomatic ties between US and Saudi Arabia are strained as the latter is unhappy with the former’s friendly overtures to Iran,” said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas Practice at consultancy firm EY.