[LONDON] Oil slipped towards US$55 a barrel on Wednesday, under pressure from expectations of persisting oversupply in world markets and an industry report saying US crude stocks rose further from a record high.
The American Petroleum Institute said on Tuesday crude stocks increased by 1.6 million barrels last week. Stocks are already at a record high, according to the US government's Energy Information Administration (EIA), which issues its latest report on Wednesday.
Crude had come under pressure on Tuesday from International Energy Agency (IEA) forecasts of continued supply growth in the United States to 2020 despite lower prices, and of a possible further rise in stocks this year. "The supply growth in 2015 is likely to continue unabated, albeit at a somewhat lower rate," Fereidun Fesharaki at Facts Global Energy said in a market note. "This all means a weak market in 2015 and even lower oil prices. Demand rebound will not save the oil market." Brent crude futures were down US$1.37 at US$55.06 by 1415 GMT. US crude traded at US$49.22, down 80 cents, having reached a high of US$51.14 earlier in the session.
After more than halving since June, oil prices have rallied by over 20 percent in the last four weeks. Kuwaiti Oil Minister Ali al-Omair said on Wednesday crude prices could rise to US$60 a barrel by the end of the year.
But analysts agreed with IEA predictions that following the crash, oil prices would stabilise well below the highs of more than US$100 a barrel seen in the last three years.
Jefferies Bache analysts said Brent and US crude, known as West Texas Intermediate (WTI), would fall in the short term as the market responded again to oversupply. "We still expect fresh WTI lows and an ultimate decline towards the US$40 area," they said in a note to traders. "Assuming our US$40 WTI target is achieved, a nearby Brent price in the US$48 area would be implied." "All in all, we are maintaining a bearish stance." Adding further pressure on prices, the EIA kept its 2015 and 2016 domestic oil output forecasts virtually unchanged from the previous month.
The EIA expects US oil production in 2015 to be 9.3 million barrels per day, slightly lower than the 9.31 million bpd forecast in last month's short-term energy outlook.