Oil prices edge higher; Brent crude trades above $48 a barrel

Oil prices edged higher on Wednesday in a further sign of support around current levels, but analysts fretted that the outlook for the next six months remained bleak due to oversupply.

Oil prices fell by as much as 5 per cent on Tuesday after the International Monetary Fund (IMF) cut its global economic forecast for 2015 and key producer Iran hinted prices could drop to US $25 a barrel without supportive action from the Organization of the Petroleum Exporting Countries (OPEC).

Prices stabilised on Wednesday, with traders pointing to buying this week whenever benchmark Brent crude oil dropped towards US $48 a barrel.

Brent was trading at US $48.44 a barrel at 09:43 am, up 45 cents from its last settlement, while US crude was up 48 cents at $46.95 a barrel.

Analysts, however, said they expected low prices to continue for the next half-year.

"We see little scope for avoiding a large stock build in 1H15 and therefore anticipate weak prices... Commodity price strength is inversely related to the dollar. With the US in monetary tightening mode and Europe and Japan in an expansive phase, an expected stronger dollar will create headwinds for any upward oil price improvement," BNP Paribas said in a note overnight.

Lower oil prices are bringing down inflation in many countries, especially Asian and European economies that have to import the fuel to meet a lot or most of their demand.

"Headline inflation rates have come down sharply in developed economies because of low oil prices ... The global low-inflation environment has created room for policy easing in key economies, most notably in the euro area," US-based Pira Energy Group said in an overnight note.

(Reuters)