Singapore: Oil prices dipped in early Asian trading on Wednesday as high production and stocks continued to undermine markets, and analysts said a rebound in prices this year remained fragile, with volatility set to persist.
Benchmark Brent crude futures were down 13 cents from their last settlement to $64.51 per barrel at 0100 GMT. U.S. WTI crude fell 17 cents to $56.89 a barrel.
Analysts said that supply and demand fundamentals pointed to ongoing weakness in oil and other commodities.
"Despite a 45 percent rally in oil prices from their January lows... we do not think the commodity cycle is turning conclusively just yet and expect a lot of price volatility ahead," Barclays said in its quarterly commodity review, published on Wednesday.
"However, supply growth in many markets is still too rapid and high inventory levels are likely to be a drag on prices for some time, so we do not see much further price upside before later in H2 15," it added.
Market data also implied that traders remained cautious about a recent price rally.
Put options for WTI prices falling back to $40 a barrel are currently worth 9 cents, compared with just 4 cents for call options at $70 per barrel for WTI, implying more demand by traders protecting themselves against lower prices.
A put option gives a trader the right, but not an obligation, to sell a financial product at a specified price, while a call option gives an investor the right to buy a product at a specific price.
Similarly, open interest in put options for WTI prices to fall back to just $30 a barrel has more than tripled since late February to more than 45,500 open contracts.
This compares to just 27,800 and 21,300 open contracts for call options of price rises to $80 and $70 a barrel, respectively, for WTI, showing higher demand by traders to hedge themselves against price falls.
