Oil prices retreat as high supply weighs

Biodiesel. Image source Telegraph UK

Oil prices eased on Tuesday as a climate of high crude supplies offsets moves by China to boost the world’s second largest economy and biggest consumer of energy.

Brent North Sea crude for delivery in June fell 65 cents to stand at $62.80  a barrel in London midday deals.

US benchmark West Texas Intermediate for May delivery dipped 23 cents to $56.15 a barrel compared with Monday’s close.

“The oil market is being pushed in two directions with the stimulus action by China going against the oversupply situation of crude in the United States,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, told AFP.

The People’s Bank of China on Sunday cut by one percentage point the amount of cash lenders must keep in reserve, the second reduction this year and the latest easing measure aimed at kickstarting the world’s number-two economy after the United States.

It has also cut interest rates twice since November.

Despite prices being lifted slightly on hopes that the Chinese stimulus will spur demand, McCarthy said dealers remained concerned over surging US production.

This is despite reports last week indicating that US shale oil output may be on the cusp of easing, he said.

“We expect the US stockpiles report (on Wednesday) to reflect an increase by three to four million barrels of production this week, a rebound from last week’s modest numbers,” McCarthy said.

The Department of Energy last week said US oil production fell by 20,000 barrels to 9.38 million barrels per day, in the week ending April 10.

Analysts said that decline should help ease the global crude oversupply, which led to a collapse in prices of more than 50 percent between June and January.