Image: Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin
By Henning Gloystein
SINGAPORE (Reuters) – Oil prices on Monday made up ground from steep falls in the previous session but analysts said oversupply meant the market remained weak.
U.S. West Texas Intermediate (WTI) crude futures were trading at $29.89 per barrel at 8.38 p.m. ET, up 25 cents from their last settlement. International benchmark Brent was up 24 cents at $33.25 per barrel. Both contracts had fallen almost 4 percent on Friday.
Despite Monday’s gains, analysts said that market conditions remained weak due to an ongoing glut.
Record U.S. crude stocks of 504.1 million barrels pulled back gains from last week’s relief rally on the announcement of a production freeze by Russia and the Organization of the Petroleum Exporting Countries (OPEC).
“Crude stocks in the U.S. are at record highs and production is also at or near records and remains way above daily demand, so freezing production at current levels won’t reduce the glut, but will actually add to it further,” one oil trader said.
With production outpacing demand by 1-2 million barrels every day, crude prices have fallen around 70 percent since mid-2014.
Analysts also said that some producers seemed to show little commitment to a deal reached by Russia and OPEC leader Saudi Arabia, and supported by Qatar and Venezuela, to freeze output at January levels.
“The lack of commitment from some OPEC members on a production freeze remains the key headwind short term,” ANZ bank said on Monday.
OPEC-member Iran has shown little interest in restraining production as it was only allowed a full return to oil markets in January following years of sanctions.
Reuters market analyst Wang Tao said that U.S. WTI crude prices could fall below $28 per barrel, based on technical chart data.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Michael Perry)
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