Apr 28, 2016 06:20 PM EDT
Oil futures in Asian trade has tumbled in early trade on Wednesday following profit taking amid growing concern over a larger-than-expected build in U.S. crude stocks. The US crude stock has apparently overweighed a report that Russia and Saudi Arabia have reached an agreement on an oil output cap.
Prices for Brent crude LCOc1 have dropped 37 cents to $44.32 a barrel as of 0037 GMT. The drop takes place after hitting a fourth-month high just in its previous session settling up $1.86 or 4.3%. Meanwhile, US crude CLc1 has dropped 46 cents to $41.71 a barrel after settling up $1.81 or 4.48% during the previous day, reports Reuters.
A firmer US Dollar has also caused pressuring oil prices. A stronger greenback has made dollar-denominated commodities more expensive for holders of other currencies.
Asian Time Zone has started taking a few profit due to rise in oil prices, reportsBusiness Standard quoting Jonathan Barrat, chief investment officer at Sydney's Ayers Alliance. It is natural to expect that oil production will be increased due to rise in prices. But investors are in grave concern over higher curtailing moves by oil producers including Russia and Saudi Arabia.
Concerns for oil have started to grow following a consensus reached in between Saudi Arabia and Russia on Tuesday regarding an oil output freeze. However, the consensus takes place ahead of an oil producers' meeting in Doha on April 17, according to a report published in Daily Mail.
Barrat finds no reason for a freeze whenever oil is at $50 per barrel. He expects an output cap whenever the price moves back to $35 a barrel and rhetoric at $50.
Meanwhile, industry group, the American Petroleum Institute revealed data suggests that US crude stock has increased to 536.3 million last week. The figure has been compared to analyst expectations for a 1.9-million barrel increase. However, official data from US Energy Information Administration (EIA) is scheduled to be released on Wednesday.
EIA's short term energy outlook, published on Tuesday, has forecast that US crude production will fall by 560,000 barrels per day to 8.04 million barrels in 2017. Meanwhile, demand of oil inside the US will increase by 190,000 barrels per day. During the same period, global oil demand is expected to climb to 1.16 million barrels per day.
Oil producers including Russia and Saudi Arabia have decided to cut production amid such a situation whenever its prices hit a four-moth high. Such a decision by the oil producers seems to be unusual whenever oil prices are soaring. However, the US has secured its position amid volatile market situation through maintaining larger-than-expected crude oil stock.