Oil prices edged up early on Friday, lifted by firm economic indicators from the United States and Germany which could support fuel demand, but analysts warned that crude markets were threatened by another downturn because of ongoing oversupply.
Front month U.S. West Texas Intermediate (WTI) crude futures were trading at $37.64 per barrel at 0040 GMT, up 38 cents from their last close. International Brent futures were up 24 cents at $39.67 a barrel.
Traders said there was some bullish sentiment in oil markets early on Friday following statements by the U.S. Federal Reserve that the world’s biggest economy was on the path of more economic growth.
In Europe, rating agency Moody’s said that Germany – the continent’s biggest economy – expected a slight acceleration of its growth to 1.8 percent, benefitting from robust domestic demand.
Despite encouraging reports from two of the world’s biggest economies, analysts warned that oil prices could fall again soon as there were few signs that a global overhang in production of at least 1 million barrels per day (bpd) would be addressed soon.
“Investors are lacking confidence about improved U.S. seasonal demand, as a decline in U.S. crude stockpiles (reported earlier this week) was mainly attributable to weaker imports and improved refinery utilisation,” ANZ bank said. Outside the United States, production especially in parts of the Middle East is still soaring.
Iraq said on Thursday that exports from its southern ports had hit almost 3.5 million bpd by April, up from an average of 3.29 million bpd in March, putting doubts on the feasibility of a planned meeting by major producers on April 17 to freeze output levels.
Iran, which was relieved from crippling international sanctions in January which had cut its crude exports to little more than 1 million bpd, has said it would only participate in a production freeze once it had regained its pre-sanctions levels of 4 million bpd, pouring cold water on any hopes that ballooning oversupply can be reined in soon.
ANZ bank said that there were signs that a renewed downtrend could be imminent for crude oil prices.