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Wednesday, August 17, 2022

Oil prices steady after U.S. drilling cut but oversupply still weighs

By Henning Gloystein

SINGAPORE (Reuters) – Oil markets were fairly stable in early Asian trading on Monday, with U.S. crude contracts receiving support from reduced American drilling, although falling global car sales weighed on international markets.

U.S. crude futures (CLc1) were trading at $ 44.86 per barrel at 0049 GMT, up 23 cents from their last settlement, pushed by a slight fall in drilling activity.

“Baker Hughes reported U.S. oil rig count fell 10 to 652 last week. The consecutive second decline suggests a low price environment coupled with low oil price hedge is starting to impact U.S. supply,” ANZ bank said.

The International Energy Agency (IEA) said on Friday that a cut in production from non-OPEC suppliers, especially from the United States, would lead to a rebalancing of the market by next year.

Despite this, the outlook for global oil markets remained weak due to strong production clashing with stalling demand, creating a market in which more oil is produced than needed.

The global crude benchmark Brent (LCOc1) was trading at $ 48.16 a barrel, virtually flat from its last close.

ANZ said strong supply from the Middle East remained a concern on the supply side, while Macquarie bank noted that falling auto sales in August were acting as a drag on demand.

“Sales were 1.0 percent lower YoY (year-on-year), slightly more than the 0.8 percent fall seen in July 2015,” the bank said, although it added that sales could pick up towards the end of the year.

In part due to oversupply and to defend market share, Middle East supplier Kuwait set its October Official Selling Price (OSP) for crude oil to Asia 60 cents lower compared with September at a discount of $ 1.95 per barrel versus Oman/Dubai prices.

(Editing by Richard Pullin)

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