Oil prices down in volatile Asian trade

SINGAPORE (AFP) - Oil prices fell in Asia on Wednesday following a three-day rally as dealers were divided on whether the commodity has bottomed out after a plunge of nearly 60 per cent since June, analysts said.

US benchmark West Texas Intermediate (WTI) for March delivery fell 94 cents to US$52.11 while Brent crude for March eased 47 cents to US$57.44 in mid-morning trade.

WTI soared US$3.48 to US$53.05 on Tuesday, its highest close since Dec 31, while Brent jumped US$3.16 to US$57.91, its best reading since Dec 30, as dealers cheered signs that the oil industry is tightening exploration activities to cap a supply glut.

Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo, said the crude market was "extremely volatile" after the three-day rally that began Friday saw prices surge nearly 20 per cent.

"It has become increasingly difficult to discern the direction of the prices of crude oil, but the fundamentals remain unchanged," Hasegawa told AFP.

He added that prices could "fluctuate by increasing up to US$10 and falling up to US$10" in the short term.

Deep cuts in capital spending by major oil companies, including new announcements Tuesday by BP and BG Group, had suggested there would be tighter supplies in the future.

Last week, The Baker Hughes North America rig count report for the week to Jan 30 showed a drop of 128 rigs to 1,937. That compared with 2,393 a year ago.

Some analysts, however, remain doubtful that the current oil price rebound will be sustained as supplies still outweigh demand in the immediate term.

The oil market has lost more than half its value since June, when crude cost more than US$100 a barrel, largely due to a surge in global reserves boosted by robust US shale oil production.

The problem was exacerbated in November after the Opec cartel insisted that it would maintain output levels despite plunging prices. The 12-nation group pumps about 30 per cent of global crude.