Oil prices dropped over 1 per cent yesterday, 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 about future oil demand amid weakening global economic growth and doubts over the impact of planned production cuts led by the Organisation of the Petroleum Exporting Countries (Opec) were also pressuring prices, traders said.
International benchmark Brent crude oil futures were at US$58.90 a barrel at 0340 GMT (11.40am Singapore time), down 71 US cents, or 1.2 per cent, from their last close. Brent has fallen more than 4 per cent in the past three sessions so far.
US West Texas Intermediate (WTI) crude futures were down 60 US cents, or 1.2 per cent, at US$49.27 a barrel.
Both US crude and Brent have shed more than 30 per cent from early October amid swelling global inventories, with WTI currently trading at levels not seen since October last year.
"Opec is reducing production to attempt to rebalance. However, data from Cushing still shows an oversupply," portfolio manager Hue Frame of Frame Funds said.
"This isn't being viewed favourably... especially in combination with slow global growth."
Inventories at the US storage hub of Cushing, Oklahoma, which is the delivery point for the WTI futures contract, rose by more than one million barrels from Dec 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday.
Meanwhile, oil production from seven major US shale basins is expected to climb to 8.03 million barrels a day by the end of the year for the first time, the US Energy Information Administration said on Monday.
"Rising US 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 Mr 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 US 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 a day so far this month.
Mr Lu said: "Market confidence remains extremely delicate amid looming economic uncertainties as investors contemplate weaker fuel demand beyond 2018."