By Koustav Samanta
SINGAPORE (Reuters) – Oil prices dropped 1 percent on Tuesday, extending losses from the previous session as reports of a big climb in U.S. inventories and forecasts of record shale output stoked worries about oversupply.
Concerns around future oil demand amid weakening global economic growth and doubts over the impact of planned OPEC-led production cuts were also pressuring prices, traders said.
International Brent crude oil futures were at $58.95 per barrel at 0141 GMT, down 66 cents, or 1.11 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 40 cents, or 0.8 percent, at $49.48 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, 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) for the first time on record by year-end, the U.S. Energy Information Administration said on Monday.
With oil prices now falling, unprofitable shale producers will eventually stop operating and cut supply, but that will take some time, analysts said.
“We need to see sustained lower prices for producers to reduce their output levels, and we see prices will maintain low levels through 2019,” said Sydney-based Frame.
FUELLING DOUBTS
Supply curbs agreed by the Organization of the Petroleum Exporting Countries (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.
Fuelling those doubts, Russian oil output has been at a record-high of 11.42 million barrels per day (bpd) so far in December.
“There remains high suspicion as to what extent Russia will fill their commitment,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
“But enveloping supply concerns is the increasing likelihood of a protracted economic downturn in China that continues to stoke fears of demand slowdown,” Innes added.
China’s industrial output in November rose the least in nearly three years as the economy lost further momentum.
(Reporting by Koustav Samanta in Singapore; Editing by Joseph Radford)