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 rigs Source: Bloomberg

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.’


IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Please see important Research Disclaimer.

European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement on 6 June 2019.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

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.