The oversupply of crude oil is expected to last into 2016
Singapore - AFP
Oil prices struggled in subdued Asian trade Tuesday on tepid economic data from Japan and indications that major crude exporter Saudi Arabia's 2016 budget is based on prices staying low.
Oil struggled in subdued Asian trade Tuesday on tepid economic data from Japan and indications that major crude exporter Saudi Arabia plans to keep prices at multi-year lows in 2016.
Prices tanked more than three percent on Monday, effectively dousing a rally that followed Brent crude tumbling to 11-year lows last week. Volumes were thin with investors in holiday mood.
At around 0700 GMT, US benchmark West Texas Intermediate for delivery in February was up 12 cents at $36.93 and Brent crude for February was trading six cents higher at $36.68. Both contracts were down earlier Tuesday.
Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the price weakness could have been sparked by data showing Japanese industrial production fell 1.0 percent in November from a month earlier.
The figures came after separate data last week showed persistently weak inflation and household spending.
"We do not often see Japanese data impact oil prices this much. However, in the absence of major news such as those from the US, even the minor ones shake the market," Ang told AFP.
Reports that key petroleum exporter Saudi Arabia will cut fuel and utility subsidies in response to a record budget deficit to cope with plunging oil prices also spooked the market.
Bloomberg News said Saudi's 2016 budget is probably based on crude prices of about $29 a barrel, suggesting the oil powerhouse intends to stick to its policy of maintaining high output despite low prices.
The kingdom and its Gulf partners, all key members of the influential Organization of the Petroleum Exporting Countries, had opposed calls by poorer OPEC members to slash the group's high production levels in order to ease a supply glut and push up prices.
The crude oversupply is expected to last into 2016, with no production cuts in sight and Iran poised to ramp up its exports within months once Western economic sanctions are lifted as part of a deal to curb Tehran's nuclear ambitions, analysts said.