SINGAPORE Oil prices edged up on Monday as France launched large-scale air strikes against Islamic State in Syria, but analysts said commodities were expected to remain under pressure as oversupply weighs on prices.
Crude benchmarks, which lost 8 percent last week, saw high levels of activity in early dealing as commodity traders looked for direction after the deadly attacks in Paris on Friday.
Front-month U.S. crude futures CLc1 was at $40.87 per barrel at 0744 GMT, up 13 cents from their last close.
Internationally traded Brent LCOc1 was at $44.64 a barrel, up 17 cents after failing to break resistance at $45 a barrel.
Traders said the higher prices were largely a matter of sentiment, with a premium being factored in following France’s large-scale air strikes against Islamic State in Syria in response to the attacks in Paris.
“France started to increase its participation against ISIS in Syria. This has pushed prices up only slightly, preventing the bearish momentum from continuing,” said Daniel Ang of Singapore-based Phillip Futures.
Generally, though, oil markets seem more concerned with bearish fundamentals, and most analysts said oil prices would remain under pressure due to high inventories and slowing economic growth.
“Our outlook is skewed negative into (the first half of next year). Macro headwinds remain, crude oil inventories are building,” Morgan Stanley said.
Oil prices have dropped more than 60 percent since June last year as high production and inventories have coincided with an economic slowdown in Asia, particularly in China but also Japan, which slipped back into recession in the third quarter.
“The fact that both crude oil and combined crude and product stocks are near record levels is a reason for concern,” Barclays bank said.
Baker Hughes data showed the first rise in the U.S. oil rig count in 11 weeks last Friday, while the International Energy Agency said there was a record 3 billion barrels of crude and oil products in tanks worldwide.
The oil in storage is comparable to a months’ worth of global oil consumption.
Some analysts, however, said the global glut was not as big as commonly estimated.
Morgan Stanley said it sees an average crude oil oversupply of only 700,000 to 1 million barrels per day (bpd) for 2015, not the 1.5 million to 2.5 million bpd figures often cited.
Despite the oil glut, trading continues unabated, with open interest – or the number of unsettled deals – in front-month Brent futures soaring to record highs just as prices slumped.
(Editing by Ed Davies and Tom Hogue)
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