#AceMarketsNews – Sept.02: Oil prices fell on Wednesday as concerns about the global economy exacerbated worries that an oversupply of crude could last longer than expected (Reuters) reported.
Weak manufacturing reports from China, the United States and Europe undermined global equities, while a stronger-than-expected build in U.S. crude stocks drove oil market sentiment down, analysts said.
Wednesday’s fall compounded an 8 percent drop in Brent and U.S. crude prices on Tuesday, which ended a 25 percent three-session surge, the largest three-day gain since 1990.
“A rise of around 25 percent in three consecutive days was not going to be sustained,” BNP Paribas oil analyst Harry Tchilinguirian said. “The underlying fundamentals are bearish.”
Brent crude for October was down $1.10 at $48.46 a barrel by 1100 GMT. U.S. crude for October fell $1.20 to $44.21 a barrel.
“Financial market turmoil is undermining global economic growth and reducing the demand for inventory which is especially negative for oil prices,” PIRA Energy Group said.
Natixis analyst Abhishek Deshpande said: “China in particular is bearing down on commodities.”
Oil prices retreated after data from industry group the American Petroleum Institute on Tuesday showed U.S. crude stocks surged by 7.6 million barrels to 456.9 million in the week to Aug. 28. Analysts in a Reuters poll had expected just a 32,000-barrel gain.
The market is expected to hold steady until official inventory data is released by the U.S. Energy Information Administration later on Wednesday, analysts said.
Some traders argue the oil market may be about to see another big sell-off.
Hedge fund manager Pierre Andurand said U.S. crude could move towards a range of $25-$50 a barrel over the next two years.
“The market will remain oversupplied in 2016 and 2017,” Andurand told the Financial Times. “We need low prices for longer to rebalance the market. There are no quick fixes.”
A global glut of oil caused by high U.S. production and record crude pumping in the Middle East has been weighing on prices.
Despite oversupply and low prices, ConocoPhillips and Husky Energy Inc on Tuesday said they would start production at two new Canadian oil sands projects that will produce around 178,000 barrels per day.
Other analysts say crude prices have fallen too far, too fast and should recover gradually over the next year.
A Reuters poll of analysts on Tuesday forecast Brent would average $62.30 a barrel in 2016 and U.S. crude $57 a barrel.
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