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A picture taken on June 23, 2008 shows a flame from a Saudi Aramco oil installion known as “Pump 3”

Oil prices slip off multi-month highs

* Record US crude stocks, global glut cap recent gains

* Oil meeting on output freeze unlikely without Iran progress

* Analysts expect glut to last into 2017

Oil prices fell on Thursday, after hitting three-month highs this week, with analysts warning that larger gains would be unwarranted as refineries enter seasonal maintenance and a global glut weighs.

Brent crude futures were at $39.97 per barrel at 1439 GMT, down $1.10 from their last close, having earlier this week peaked at $41.48, the highest level since December 9.

US crude was down 75 cents at $37.53 per barrel, having hit $38.51 on Tuesday, also its highest since December 9.

"Fundamentally you would expect prices to weaken from here because we're about to head into peak refinery turnaround season," said Virendra Chauhan, an analyst at Energy Aspects.

"We expect weakness in the physical market as demand from refineries comes off."

Global demand for crude oil typically dips when refineries around the world enter seasonal maintenance in spring, ahead of peak summer demand.

Prices rose as much as 5% on Wednesday, after a big gasoline inventory drawdown in the US overshadowed record-high crude stockpiles.

But analysts warned that a global crude production overhang of more than 1mn barrels per day (bpd) showed little sign of abating.

The focus lies on a potential agreement to rein in output between producers from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and non-Opec exporters including Russia.

A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as Opec member Iran is yet to say whether it would participate in such a deal.

"It would be a surprise if something were agreed, but I think we should also remember that no longer are they discussing a cut, they're discussing a freeze, which we don't think would have much impact until the second half of 2017 versus our model assumptions," Michael Hsueh, commodity analyst at Deutsche Bank said.

Most analysts expect the oil glut to last into 2017 or even 2018, resulting in low prices.

Only by 2020 is there a consensus for prices to rise towards $70 a barrel, based on low investment in production.

The European Central Bank cut all three of its interest rates and expanded its asset-buying programme on Thursday, delivering a bigger-than-expected cocktail of actions to boost the economy and stop ultra low inflation becoming entrenched.

Surprising markets, it cut its main refinancing rate to zero from 0.05%.

The dollar strengthened against the euro in the wake of the news, potentially hampering dollar-traded oil imports.  

 

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