SINGAPORE: Crude prices dipped in Asia Tuesday but held above $40 as traders awaited a summit of key oil producers next week to discuss freezing output and easing the supply glut.
Analysts said prices were expected to see-saw before Sunday’s meeting in the Qatari capital Doha that will bring together both OPEC producers led by Saudi Arabia and non-OPEC members such as Russia.
A major topic is a proposal to freeze output at January levels to try to ease oversupply after prices plunged by three-quarters to near 13-year lows between August 2014 and February this year.
At around 0700 GMT US benchmark West Texas Intermediate for delivery in May was down seven cents, or 0.17 percent, at $40.29. Brent crude for June was trading five cents, or 0.12 percent, lower at $42.78.
Both contracts closed higher on Monday after soaring eight percent or more last week.
Barclays Research said the market was expected to remain “neutral” until after the April 17 summit.
“We expect better directional momentum after the meeting of OPEC and non-OPEC countries,” it said in a commentary.
However, Barclays noted that the “current expectation is for their actions to have limited impact given the lack of involvement in the freeze of producers that have the potential to grow output.”
Key OPEC member Iran has been raising output since nuclear-linked Western sanctions were lifted in January and has signalled it will not join the freeze calls.
Some analysts have said only a production cut, rather than a mere freeze, could permanently boost prices amid weak demand in the oversaturated market.
“Supply outages and adjustments to output in response to lower oil prices are helping to tighten market balances,” Barclays said.
But “the demand side remains a lot softer” in the first half of 2016 relative to the same period last year, it said.
