Oil prices fall for third straight session amid supply glut worries




  • In Business
  • 2018-12-18 03:59:58Z
  • By By Koustav Samanta
Pump jacks operate in an oil field in Midland
Pump jacks operate in an oil field in Midland  

By Koustav Samanta

SINGAPORE (Reuters) - Oil prices dropped over 1 percent on Tuesday, falling for a third straight session, as reports of inventory builds and forecasts of record shale output in the United States, currently the world's biggest producer, stoked worries about oversupply.

Concerns around future oil demand amid weakening global economic growth and doubts over the impact of planned production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) were also pressuring prices, traders said.

International benchmark Brent crude oil futures were at $58.90 per barrel at 0340 GMT, down 71 cents, or 1.2 percent, from their last close. Brent has fallen more than 4 percent in the past three sessions so far.

U.S. West Texas Intermediate (WTI) crude futures were down 60 cents, or 1.2 percent, at $49.27 per barrel.

Both U.S. crude and Brent have shed more than 30 percent from early October amid swelling global inventories, with WTI currently trading at levels not seen since October 2017.

"OPEC is reducing production to attempt to rebalance. However, data from Cushing still shows an oversupply," said Hue Frame, portfolio manager at Frame Funds.

"This isn't being viewed favorably by the market, especially in combination with slow global growth."

Inventories at the U.S. storage hub of Cushing, Oklahoma, which is the delivery point for the WTI futures contract, rose by more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday.

Meanwhile, oil production from seven major U.S. shale basins is expected to climb to 8.03 million barrels per day (bpd) by the end of the year for the first time, the U.S. Energy Information Administration said on Monday.

"Rising U.S. shale production levels along with a deceleration in global economic growth has threatened to offset OPEC+ efforts as markets weigh the potential of looser fundamentals," said Benjamin Lu Jiaxuan, an analyst at Singapore-based brokerage firm Phillip Futures.

With oil prices now falling, unprofitable shale producers will eventually stop operating and cut supply, but that will take some time, analysts said.

Supply curbs agreed by OPEC and its Russia-led allies might not bring about the desired results as U.S. output goes on increasing and as Iran keeps pumping out more oil, analysts said.

The cuts are also coming from currently high production. Oil output from Russia has been at a record-high of 11.42 million barrels per day (bpd) so far in December.

"The strength of OPEC+ cuts will be weighed against Iranian production levels in lieu of U.S. waivers till Q2 2019," analyst Lu Jiaxuan said.

"Market confidence remains extremely delicate amidst looming economic uncertainties as investors contemplate on weaker fuel demand beyond 2018."

China's industrial output in November rose the least in nearly three years as the world's second-largest economy lost further momentum.


(Reporting by Koustav Samanta in Singapore; Editing by Joseph Radford and Christian Schmollinger)

COMMENTS

More Related News

Russia says oil price war with U.S. would be too costly
Russia says oil price war with U.S. would be too costly

Russia should not unleash an oil price war against the United States but rather stick with output cuts even at the cost of losing market share in the medium term, one of the main Russian architects of a production pact with OPEC said. Since 2017, Russia and OPEC have cut oil production jointly for the first time in an effort to boost the price of crude. Following their supply pact, oil has traded between roughly $60 and $85 per barrel, from below $30 before the deal took effect.

Oil steady on hopes Chinese fiscal stimulus will stem economic slowdown
Oil steady on hopes Chinese fiscal stimulus will stem economic slowdown

International Brent crude oil futures were at $61.49 per barrel at 0314 GMT, virtually unchanged from their last close. U.S. West Texas Intermediate (WTI) crude futures were at $52.98 per barrel, 3 cents below their last settlement. The steadier prices followed a 2-percent fall in crude futures and a slump in international financial markets on Tuesday as concerns over global growth spooked investors into looking for safe-haven assets such as government bonds or gold.

Schlumberger Delivers Growth Where It Matters
Schlumberger Delivers Growth Where It Matters

Even though revenue and earnings slipped for the oil services giant, its international business is still on the up-and-up.

Oil prices edge down as global growth worries threaten demand
Oil prices edge down as global growth worries threaten demand

Oil prices edged lower on Tuesday as concerns over global economic growth stoked fears over future demand. International Brent crude oil futures were down 10 cents, or 0.2 percent, at $62.64 by 0106 GMT. U.S. West Texas Intermediate (WTI) crude futures were at $53.70 per barrel, down 0.1 percent, or 4 cents.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.