BackOil falls 2% on demand concerns
November Brent crude futures were down 75 cents, or 1.5%, at $48.17 a barrel, after having hit an intraday low of $47.70
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London: Crude oil prices fell as much as 2% on Tuesday on uncertainty over whether global demand will be enough to erode a sky-high surplus, ahead of a weekly survey of US inventory levels.
Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilised after losing more than half its value in a year, and the persistence of the highest global surplus in modern times.
There is evidence that US shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency to issue more bullish forecasts for the market balance next year.
Capital Economics analyst Thomas Pew said there has been a loss of some half a million barrels of oil per day in US production in the last couple of months alone.
But uncertainty is running high over the outlook for demand in top consumers such as China, as well as the resilience of the US economy following the Federal Reserve’s policy meeting last week.
“Certainly, nothing is certain. That’s the only certain thing that there is. That being said, it does look like lower prices have finally started to take their toll on US production," Pew said.
“All eyes are going to be on whether that continues," he said, adding that Capital Economics’ forecast was for a gradual rise in oil prices over the coming years.
November Brent crude futures were down 75 cents, or 1.5%, at $48.17 a barrel by 1345 GMT, having hit an intraday low of $47.70.
On Monday, Brent rose as much as 3%.
US West Texas Intermediate (WTI) crude futures for November were down $1.11 at $45.85 a barrel, bringing the discount to Brent to around $2.25 a barrel, down from about $2.60 a week ago.
“Whether the prices will further converge in the near future, or whether WTI will even become more expensive than Brent, will depend to a major extent on the U.S. inventory trends," Commerzbank analysts said in a report.
“Even if speculators are focusing on the decrease in U.S. production at present, it is important not to forget that US crude oil stocks are still currently 28% ... higher than usual."
American Petroleum Institute (API) data later on Tuesday is expected to show a weekly drop in US crude inventories. Reuters
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