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[SINGAPORE] Oil prices fell on Wednesday as an unexpected rise in inventories pulled down US crude contracts, while Brent was weighed down by China's bleak economic outlook and a widespread expectation that Opec will maintain high production.
US crude was trading down 34 cents at US$41.51 per barrel at 0748 GMT. Internationally traded Brent was 24 cents lower at US$44.20 a barrel. "The market is a little bit skittish ahead of the Opec meeting, it is going to be very range-bound between now and Friday," said Ben Le Brun, market analyst at Sydney's OptionsXpress.
Oil production exceeds demand by 0.5-2 million barrels per day. The glut has seen prices tumble over 60 per cent since June 2014, but Opec is not expected to budge from its stance of keeping output high to defend market share against producers such as Russia and North America. "Similar to consensus, we see no material change in policy from the Dec 4 meeting," Morgan Stanley said. "Saudi Arabia is... unlikely to support a cut. The strategy appears to be working and cutting at this point may be futile or send a negative signal politically. Also, their financial position does not suggest any urgency," it added.
Beyond Opec's upcoming meeting, oil traders remained focused on growing stockpiles.
Data from the American Petroleum Institute (API) showed a 1.6 million barrels rise in US crude inventories last week to 489.9 million.
The US government's Energy Information Administration's inventory report will be published later on Wednesday.
But oil markets are getting some support from Chinese demand as the world's biggest energy consumer takes advantage of low prices to build up strategic reserves.
On the demand side, analysts also said that China's economic outlook remained weak. "China's manufacturing sector is stuck in contraction," said Frederic Neumann of HSBC in Hong Kong, and he added that "in the United States, momentum is fizzling as well." Low oil prices in combination with high debt levels are putting heavy pressure on corporate energy earnings. "The global oil and gas sector is heavily indebted, with upstream companies holding around US$1.1 trillion in US-dollar-denominated corporate bonds and loans," BMI Research said. "While the current debt load does not pose a systemic threat to the industry, a pullback in low-cost financing will be a necessary precursor to the broader rebalancing of the physical oil market," it added.