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Tue 14 Apr 2015 12:27 PM

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Oil prices rise on expected dip in US shale output

Global production remains high, China's economy seen slowing

Oil prices rise on expected dip in US shale output

Crude prices
rose on Tuesday on expectations US shale oil output will record its first
monthly decline in over four years, but analysts warned that the broader market
remained oversupplied.

Front-month
Brent crude futures were trading up 52 cents a $58.45 a barrel by 0332 GMT,
while US crude had risen 63 cents to $52.54.

The US Energy
Information Administration expects US shale production to fall by 45,000
barrels to 4.98 million barrels per day in May from April.

That would
underscore how record crude output from the US shale boom may be backtracking
after global markets saw prices effectively slashed by 60 percent since June on
oversupply and lacklustre demand.

While political
instability in the Middle East also helped push up prices, analysts said that
high global production and stocks were capping gains.

"Geopolitical
risk in oil markets remains elevated. From a fundamental perspective however,
supply from the Middle East is expected to remain high, with Saudi Arabia and
Iraqi production on the rise," JP Morgan said in a note.

"Our base
case is for crude stocks to decline through 2015, as US production is expected
to turn lower in 2Q2015. If production, however, remains unchanged through the remainder
of 2015, US crude stocks will likely increase to above 540 million barrels
during the fall refinery maintenance period," it said.

Analysts also
said that demand remained relatively weak.

"With
China's Q1 GDP figures about to be released tomorrow, we see very little upside
even if prices move up today," Singapore-based brokerage Phillip Futures
said.

China's economy
is growing at its slowest pace in 25 years and its export sales contracted 15
percent in March, a shock outcome that deepens concern about sputtering Chinese
economic growth.

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