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Oil slips back towards 18-month lows on oversupply fears after 8% rebound
OIL prices fell on Thursday after rebounding 8 per cent in the previous session, as worries over a glut in crude supply and concerns over a faltering global economy pressured prices even as a stock market rally offered support.
Brent crude oil fell US$1.67 a barrel, or 3.1 per cent, to a low of US$52.80 before recovering to around US$53.30 by 1010 GMT. US light crude oil dropped US$1.30 to US$44.92 and was last 90 cents lower at US$45.32.
Oil prices reached multi-year highs in early October but are now approaching their lowest levels for 18 months. Both crude oil benchmarks have lost more than a third of their value since the beginning of October and are heading for losses of more than 20 per cent in 2018.
"Fear of a bear market remains in place," said Johannes Gross at Vienna-based consultancy JBC Energy.
Three months ago, it looked as if the global oil market would be under-supplied through the northern hemisphere winter as US sanctions removed large volumes of Iranian crude. But other oil exporters have more than compensated for any shortfall, filling global inventories and depressing prices. The fuel glut has combined with faltering investor sentiment in other asset classes, producing a bear market for oil.
Stock markets rebounded on Wednesday after US President Donald Trump's administration attempted to shore up investor confidence.
The Organization of the Petroleum Exporting Countries met earlier this month with other producers including Russia and agreed to reduce output by 1.2 million barrels per day (bpd), equivalent to more than 1 per cent of global consumption.
But the cuts won't take effect until next month and oil production has been at or near record highs in the United States, Russia and Saudi Arabia, with the US pumping 11.6 million bpd of crude, more than both Saudi Arabia and Russia.
Although US sanctions have put a cap on Iran's oil sales, Tehran has said its private exporters have "no problems" selling its oil.
"Markets need more concrete evidence on improving fundamental metrics and to bring the supply-demand relationship back to balance before oil prices can reach a real bottom," said Margaret Yang, market analyst at CMC Markets.
Data on the US market will appear in the next couple of days with figures from the American Petroleum Institute on Thursday and a report from the US Energy Information Administration on Friday. A Reuters survey estimated that US crude inventories dropped 2.7 million barrels in the week to Dec 21. REUTERS