Oil prices fall almost 4% amid oversupply and low demand fears

Oil prices succumbed to pressures on Tuesday, with ongoing concerns over overproduction and weaker global demand growth driving the value of crude down.

Brent crude fell as much as 3.7% on Tuesday morning, hovering at around $58.15 a barrel as of 11:50am GMT. Elsewhere, its US counterpart, West Texas Intermediate (WTI) slid 4% to $47.95 – its lowest level since September 2017.

Oil under pressure

Yet more pressure on oil markets has forced prices to fall below support levels, with the international and US benchmarks Brent crude and WTI closing below $60 and $50 a barrel on Monday.

According to ING commodities strategist Warren Patterson, the decline in oil prices is being driven by a broader market sell-off that has seen US and Asian equity markets suffering significant losses.

The oil market is showing ‘no clear signs’ tightening and is unlikely to do so until next year when OPEC+ countries implement supply cuts that were agreed earlier this month in Vienna, Patterson said.

The American Petroleum Institute (API) is scheduled to release its weekly inventory figures on Tuesday and could provide support for oil markets if ‘their number is aligned with market expectations for a 3.25MMbbls draw,’ he added.

Oversupply fears continue

In its latest Drilling Productivity Report, the Energy Information Administration (EIA) forecast US shale production will increase by 134 million barrels a day to 8.17 million in January 2019.

The agency also revised its forecast higher last month for December 2018 production from 7.94 million barrels a day to 8.03 million.

‘Meanwhile the number of drilled but uncompleted (DUCs) wells increased by 287 over the month, to total 8,723 by the end of November,’ Patterson said.

‘While the build-up in DUCs in recent months has been driven more by constraints rather than unattractive prices, the latter could become more of a driver if the current weak price environment lingers on for much longer.’