Oil prices have rallied sharply in recent weeks amid hopes supply could be cut, but analysts warn the rally was overblown. Hayley Platt reports.
It was enjoying eight week highs. But the rally - it seems - was too good to last. Brent Crude slipped back slightly by 39 cents. Weak fundamentals to blame. There's still hopes of a possible output freeze when OPEC meets in Algeria next month - although that's looking unlikely. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "Clearly Iran having come back onto the global market place want to start to scale up production and will be very reluctant to do a production cap, something that they indicated back in April. What has changed in the intervening months, I'd argue very little." Iraq has recently rejoined the market adding around 70,000 barrels a day to an already saturated market. But demand for crude - which makes gasoline - has been falling. Especially from China which is closing many of its factories to focus on boosting its domestic economy. Another reason why the price of oil is likely to stay low. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "Supply is much more sensitive to small changes in the price level down at these lower levels then we thought. And alongside that is this technological shift away from oil and towards more efficient, less carbon intensive energy sources. For me the balance suggests a lower oil price than some of the estimates looking at 60/70 dollars by the end of the year." And that of course won't help the earnings of energy companies or the oil producing nations that rely on its revenue.