Oil prices fall almost 4% amid oversupply and low demand fears
West Texas Intermediate fell to 15-month low as ongoing concerns about oversupply and diminishing global growth take its toll on oil prices.
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.’
See an opportunity to trade?
Go long or short on more than 15,000 markets with IG Bank.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.