Oil extends gains in Asia but prices remain under pressure

Storm clouds gathering over Shell's Pulau Bukom oil refinery in Singapore on Dec 17, 2014. Oil extended gains in Asia Thursday following a drop in US crude stockpiles. -- PHOTO: REUTERS
Storm clouds gathering over Shell's Pulau Bukom oil refinery in Singapore on Dec 17, 2014. Oil extended gains in Asia Thursday following a drop in US crude stockpiles. -- PHOTO: REUTERS

SINGAPORE (AFP) - Oil extended gains in Asia on Thursday following a drop in US crude stockpiles indicating stronger demand in the world's biggest economy, but analysts said prices remain under pressure due to a global supply glut.

US benchmark West Texas Intermediate for February delivery was up 51 US cents at US$49.16 a barrel in late-morning trade and Brent crude for February gained 41 US cents to US$51.56. Brent briefly slipped below US$50 for the first time since 2009 on Wednesday.

Prices got a boost from data showing US stockpiles fell 3.1 million barrels to 382.4 million in the week ended Jan 2.

"As the US inventories were lower than expected, we expect crude oil prices to remain stable around the US$50 mark, at least for this week's trading," said Mr Daniel Ang, investment analyst at Phillip Futures in Singapore.

But analysts cautioned against reading much into the recent price gains given overall supply-demand dynamics, with Mr Ang predicting the "bearish trend" to continue this quarter.

Crude has lost nearly half its value since June owing to a global oversupply, slowing growth in China and emerging market economies, a recession in Japan and a near-stall in the euro zone.

A stronger US currency is also denting demand for dollar-priced oil and fears of another turmoil if troubled Greece exits the euro zone are casting a shadow.

"The current uncertainty on whether Greece will stay within the eurozone has exacerbated fears over economic slowdown in Europe and negatively impacted benchmark prices," said Mr Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services organisation EY.

There are fears that a victory for the far-left Syriza party at the Jan 25 polls in Greece could see them tear up stringent measures required under an EU-IMF bailout for the country, a move that could see it leave the currency bloc.