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Mon 22 Jun 2015 12:18 PM

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Oil prices nudge higher as worries ease over Greek debt

US oil output holding at highest since 1970s

Oil prices nudge higher as worries ease over Greek debt

Oil prices nudged higher in Asian trade on Monday, after
initially falling on concerns about the outcome of a eurozone meeting on the
Greek debt crisis later in the day and continuing worries about global
oversupply.

Prices rebounded
from early lows after a European Commission official tweeted the latest
proposal from Greece was a "good basis for progress" in Monday's
talks.

"We're
seeing ... a snap back from Friday's losses, which were too aggressive,"
said Ben Le Brun, market analyst with Sydney's OptionsXpress.

Oil prices fell
nearly 2 per cent on Friday over worries about a Greek debt default.

"On a 24
hour basis we'll see some volatility depending on what happens with
Greece," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

Brent crude for
August delivery was up 29 cents at $63.31 a barrel as of 0648 GMT, after
dipping as much as 52 cents when Asian markets opened. The benchmark lost $1.24
in the previous session.

Front month US
crude was 19 cents higher at $59.80 a barrel, after finishing the previous
session down 84 cents.

Greek Prime
Minister Alexis Tsipras offered a new reforms package to foreign creditors on
Sunday in an effort to avoid default this month on 1.6 billion euros in debt
repayments to the International Monetary Fund.

Worries over
high domestic US oil production, which has held around 9.6 million barrels a
day - the highest level since the early 1970s, still weighed on oil prices,
Spooner said.

US oil
producers added a rig each in the Permian and Bakken shale basins last week,
fuelling worries over high domestic oil output, even as the total number of
active US rigs fell last week, data on Friday showed.

"My
expectation for a price increase is fairly limited," Spooner said. "One
way or another we are likely to see some production cuts. If we did see prices
go up then OPEC would increase production and/or US producers would increase
theirs as well."

Other analysts
also continue to point to the overhang of supply in the market.

Ten million
barrels of unsold crude - mainly from Nigeria - are held in offshore storage
despite strong summer demand, Morgan Stanley said in a research note on Monday,
posing a worrying outlook for oil in the second half of the year.

"If there
are this many challenged cargoes in this strong demand environment, we worry
about the outlook for physical oil this fall when crude runs and gasoline
demand fall seasonally," the note said.

And considering
the prospects of new supply from Libya and Iran a lower price environment seems
increasing likely, Morgan Stanley analysts said.

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