Oil prices continue to slide amid oversupply concerns

Oil prices extended declines on Wednesday, after falling to a seven-month low during the previous session, amid fears that rising oil output could undermine the efforts of OPEC and non-member producers to balance the market.

Global benchmark Brent crude was last trading 0.4 percent lower at $45.96 per barrel (bbl), while West Texas Intermediate (WTI) was 0.2 percent lower at $43.43/bbl.

Brent settled at $46.02/bbl on Tuesday, its lowest settlement since Nov. 15, two weeks before OPEC members agreed to cut oil production by a combined 1.2 million barrels per day.

“Investors who were ardently waiting for signs of OPEC’s strategy to balance the saturated markets are starting to lose patience, which is reflected in the bearish price action of oil,” FXTM research analyst Lukman Otunuga said in a note.

The cartel’s high compliance with output cuts last month has been overshadowed by a jump in supply from Libya and Nigeria, where production has recovered.

High global crude inventories are also playing a key role in keeping prices depressed, Otunuga added, noting that prices will remain low if US crude inventories remain at elevated levels and American shale producers continue to produce aggressively. 

The US oil rig count has been on the rise for 22 weeks in a row, increasing by six to 747 last week, according to data from oilfield services firm Baker Hughes.

Moreover, the American Petroleum Institute (API) reported on Tuesday that US gasoline stocks rose by 346,000 barrels.

While crude inventories fell by 2.7 million barrels during the same week, the market is now focusing mainly on US gasoline demand, which has been “disappointing” of late, Germany-based Commerzbank said on Wednesday.

“The oversupply is far from eliminated, and OPEC has not reached its goal despite its iron discipline. Even if we regard the current prices as favorable in the long term, any further worsening of sentiment could even push Brent to below $45 per barrel in the coming weeks,” the lender added. 

Write to Jerusha Sequeira at jerusha.s@argaamnews.com