Oil prices fall 1% on glut in supply, slowing economy

Oil production has been at or near record highs in the United States, Russia and Saudi Arabia.
Oil production has been at or near record highs in the United States, Russia and Saudi Arabia.PHOTO: REUTERS

SEOUL • Oil fell 1 per cent yesterday after soaring 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 surge offered support.

Brent crude oil futures were down 68 US cents, or 1.25 per cent, at US$53.79 a barrel by 0743 GMT. They rose 8 per cent to US$54.47 a barrel the day before.

US West Texas Intermediate (WTI) crude futures fell 1.21 per cent to US$45.66 per barrel. They jumped 8.7 per cent to US$46.22 per barrel in the previous session.

Both crude benchmarks are down roughly 40 per cent from highs touched in October.

Global stocks rebounded on Wednesday after the Trump administration's attempt to shore up investor confidence and a report on strong US holiday spending.

Samsung Securities commodity analyst Shim Hye-jin said oil prices were still low despite gains made the day before. "But if Opec's cuts are fulfilled, WTI prices are expected to rise to US$50-60 a barrel, while Brent is expected to go up to between US$58 and US$70 a barrel next year."

The Organisation of the Petroleum Exporting Countries and its allies, including Russia, agreed at a meeting earlier this month to limit output by 1.2 million barrels per day (bpd) starting next month.

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, Teheran said on Wednesday that its private exporters have had "no problems" selling its oil and that 3 million barrels could be sold soon to non-government traders.

"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 Ms Margaret Yang, market analyst for CMC Markets in Singapore.

Meanwhile, potentially bolstering oil prices, a preliminary Reuters poll on Wednesday forecast that US crude inventories would drop 2.7 million barrels in the week to Dec 21, marking their fourth straight decline.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 28, 2018, with the headline 'Oil prices fall 1% on glut in supply, slowing economy'. Print Edition | Subscribe