Brent crude reversed early losses to trade back towards $57 a barrel on Tuesday, as a weaker dollar overshadowed signs of slowing growth in China and Saudi Arabian oil production close to an all-time high.
The dollar slipped 0.25 percent against the euro, extending losses from the previous session and providing a boost to dollar-priced commodities, which tend to move inversely to the U.S. currency.
Brent futures LCOc1 for May delivery were trading up 64 cents at $56.56 by 0620 EDT, while U.S. crude CLc1 rose 60 cents to $48.05 a barrel. Its discount to Brent CL-LCO1=R widened to $8.51 a barrel.
Gains were capped by data showing factory activity in China, the world’s second-largest economy and top oil importer, slipped in March.
The flash HSBC/Markit Purchasing Managers’ Index came in at 49.2, below the 50-point level that separates growth from contraction. Economists polled by Reuters had forecast a reading of 50.6.
The Chinese data followed comments from OPEC kingpin Saudi Arabia that it is pumping around 10 million barrels of crude per day, close to an all-time high and some 350,000 bpd above the figure it gave OPEC for its February output.
OPEC’s decision to fight for market share rather than cutting output has contributed to a halving in oil prices since June as the global surplus of oil supplies has grown.
“The Saudi Arabian oil minister had only just emphasized at the weekend that his country is not willing to bear the burden of production cuts on its own,” Commerzbank analyst Carsten Fritsch said.
The market is expected to be at its weakest in the second quarter as winter fuel demand wanes while peak summer driving activity is yet to kick in. Energy consultancy FGE forecasts a global surplus of 2 million barrels per day between April and June.
“We expect crude prices to be pressured once again,” FGE said in a note.
U.S. crude stocks, which already stand at their highest in at least 80 years, were forecast to have risen for an 11th record-breaking week, a preliminary Reuters survey showed.
The poll of six analysts, taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. government’s Energy Information Administration, showed a crude stock build of 5 million barrels on average last week. [EIA/S]
In the week to March 13, U.S. crude stocks rose nearly three times as much as expected.