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Oil prices fall as analysts say August price rally has been overblown

Published 2016-08-21, 08:37 p/m
© Reuters.  Oil prices fall as analysts say August price rally has been overblown
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* Analysts say upcoming oil producer meetings unlikely to succeed

* Global oil product inventories: http://tmsnrt.rs/2br1O3U

By Henning Gloystein

SINGAPORE, Aug 22 (Reuters) - Oil prices fell on Monday as analysts doubted upcoming producer talks would be able to rein in oversupply, saying that Brent would likely fall back below $50 a barrel as August's over 20-percent crude rally looks overblown.

International benchmark Brent crude oil futures LCOc1 were trading at $50.43 per barrel at 0025 GMT, down 45 cents, or 0.88 percent.

U.S. West Texas Intermediate (WTI) crude futures Clc1 were down 27 cents, or 0.56 percent, at $48.25 a barrel.

Analysts cast doubt on a recent oil price rally, saying that much of it was a result of short-covering and anticipation of upcoming oil producer talks in September to discuss means to curb ballooning oversupply.

With no fundamental tightening of the market in sight, they said that prices would likely come under downward pressure again soon.

"Positioning data seems to confirm our view that the latest oil bounce is more technical and positioning-oriented than fundamental. In fact, new buyers have been mostly absent the past few months," U.S. bank Morgan Stanley (NYSE:MS) said.

Regarding the upcoming producer talks, the bank said that it viewed a meaningful "agreement as highly unlikely" and that there were "too many headwinds and logistical challenges to a meaningful deal".

Members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers like Russia are set to meet in September to discuss a freeze in output levels or even a cutback in order to rein in on oversupply, but analysts said animosity between OPEC-members Saudi Arabia and Iran made a deal unlikely.

"Though Iran now sits roughly 200,000 barrels per day away from its monthly pre-sanctions peak in May 2011, we do not see it accepting restraints on its output, and without Iran's inclusion, Saudi Arabia will not take part," Barclays (LON:BARC) bank said.

As a result, the British bank said that "the stars remain misaligned for an OPEC/non-OPEC freeze agreement".

Because of the ongoing production and storage overhang in crude and refined products markets, Barclays said that the 20-percent price rally since early August was unwarranted, and that oil prices of $50 or higher were currently "unsustainable".

"Oil prices will likely experience another short-term dip in the coming weeks, in our view, before more sustainably moving to average $50 in Q4," it added.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-Gobal oil product inventories are high

http://tmsnrt.rs/2br1O3U TAKE A LOOK-World oil glut persists as global slowdown looms

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