Global oil glut pressures prices; WTI below US$45

[NEW YORK] Oil prices fell again Thursday in a glum market as the global oversupply of crude oil looked entrenched and demand prospects weak.

US benchmark West Texas Intermediate for September delivery fell 49 cents to US$44.66 a barrel on the New York Mercantile Exchange, closing below US$45 for the first time since March. The WTI contract was now barely US$1 above its lowest closing level in six years.

Brent North Sea crude for September, the international benchmark, closed at US$49.52 a barrel in London, down seven cents from the day before.

"Oil just can't seem to get a break right now because we're seeing a whole lot of overall negativity about the demand outlook, with the fears the Fed is going to raise interest rates and concerns about demand in China," said Phil Flynn of Price Futures Group.

"Oil prices are acting like the market is fearful the (oversupply) won't go away," he added.

The crude glut is largely responsible for the roughly 50 per cent decline in oil prices since mid-2014. The United States is producing crude at high levels and output by the Organization of the Petroleum Exporting Countries (Opec) continues to exceed the cartel's quota of 30 million barrels per day.

In addition, investors were looking ahead to additional supplies of oil coming into the market as part of last month's historic deal between six major powers and Iran over its nuclear program.

In exchange for curbing its nuclear programme, Tehran would see the lifting of sanctions, which have slashed its oil exports.

"The current supply/demand surplus is one element of concern, but there also seems to be renewed worry over the eventual lifting of Iranian sanctions as US President Barack Obama's campaign for support is seen limiting the potential for a congressional override," said Tim Evans of Citi Futures.

US lawmakers will vote in September on whether to endorse the deal.

Traders also awaited the important US jobs report for July due on Friday. It was expected to be a key mover of the dollar, and as a consequence, have potential impact on dollar-priced crude oil.

Mixed economic signals have left the outlook for the US payrolls report uncertain. On average, analysts expect the unemployment rate will remain unchanged at 5.3 per cent, a seven-year low, and job growth to continue at a moderate pace.

AFP