Oil edged higher to near US $42 a barrel in Asia today but analysts said the increase was unlikely to last as the commodity remains under pressure by a supply glut and a strong dollar. Prices have been fluctuating since entering a bear market last week, falling more than 20 per cent and closing below US $ 40 a barrel for the first time since April.
Initially recovering as US commercial crude inventory data showed an unexpected draw in gasoline, prices tumbled again later in the week after robust hiring numbers from the US government pushed the dollar higher. A stronger greenback typically makes dollar-priced oil expensive for consumers using other currencies, denting
demand.
Weekly rig count data released Friday also showed that US drillers added seven rigs that week, up for the six-straight week and indicating higher production activity amid an over saturated market.
"Modest short covering has probably given oil some boost," said IG Markets analyst Bernard Aw, adding however, that the bounce was unlikely to last.
"Rising US rig additions, low probability of OPEC to revive... freeze output talks, and weakening demand present a great barrier for oil prices to move higher," he told AFP.
At around 0830 IST, US benchmark West Texas Intermediate for delivery in September was up nine cents to US $41.89 and Brent crude for October gained five cents to US $44.32 a
barrel.
"Upbeat jobs data from the US showed that the jobs growth was much higher in July than estimates, and helped to push the US dollar [higher], applying pressure on crude prices," said EY Services oil and gas analyst Sanjeev Gupta.
"While markets will continue to look for clues from economic data from China and Euro zone, due to the overhang of high inventory levels and continuing concerns of oversupply,crude prices are likely move in a tight range over the next couple of weeks," Gupta added
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