Tuesday, 27 October 2015 17:30
LONDON: Oil prices fell on Tuesday, extending losses into a third week, on worries over a supply glut and with U.S. inventory data expected to show another increase in crude stocks.
Brent for December delivery had fallen 30 cents to $ 47.24 a barrel by 1150 GMT, after settling the previous session down 45 cents.
U.S. crude dropped 55 cents to $ 43.43 a barrel, having touched a nine-week low of $ 43.20 earlier on Tuesday.
An expected further build in U.S. crude stocks and a glut of refined products again raised concerns of an oversupplied market.
“We expect that the focus of the oil markets is rapidly shifting to the surplus of refined products,” analysts at Jefferies wrote, adding that the bearish mood was aggravated by dropping refining profitability while demand growth slowed.
U.S. production cuts – from a peak of around 9.6 million barrels a day to around 9.1 million – and optimism over demand have failed to translate into higher prices, said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
U.S. commercial crude stockpiles are expected to have risen for a fifth straight week, by an average of 3 million barrels to 479.6 million, in the week ended Oct. 23, a Reuters survey showed.
While stocks of distillates, which include diesel and jet fuel, were seen falling by 2 million barrels, storage utilisation for distillates in the United States and Europe is nearing historic highs, Goldman Sachs said on Monday.
Also weighing on prices was news that U.S. congressional leaders had proposed to sell 58 million barrels of oil from U.S. emergency reserves to help pay for a budget deal, although the sales would happen only between fiscal years 2018 and 2025.
Longer-term, non-OPEC supply could fall next year for the first time since 2008 as deep cuts in capital expenditure by publicly traded companies lead to a 700,000 barrels-per-day fall in production to 52.7 million bpd, Jefferies added.
Analysts from the Energy Aspects think-tank added that some 5 million bpd of projects, which were meant to be completed from 2017-19, had been delayed or cancelled: “All of this will start to show up in steep declines in 2017 supplies.”
Investors await the outcomes of key policy talks this week, including a U.S. Federal Reserve meeting that starts later on Tuesday and China’s fifth plenum, a meeting of the Communist Party’s central committee, that began on Monday.
Oil prices could get support from short-covering if investors think the Fed will take a dovish view towards interest rates at its meeting, Spooner said.
“The Fed and a weaker dollar could save the day, as could improved supply statistics. That could still mean that this downswing might turn out to be a correction of the latest rally, not the beginning of a major move lower,” Spooner said in a blog post.
China’s plenum is expected to set a 7 percent annual growth target in its 13th five-year plan, a blueprint for economic and social development between 2016 and 2020.
