Oil futures fell further on Wednesday, with U.S. crude touching its lowest since 2003, as a global supply glut bumped up against bearish financial news that sparked deeper worries over demand.
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U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 17 cents at $29.70 per barrel at 0206 GMT (2106 ET), around $3.50 away from a 12-year low of $26.19 hit earlier this week. As a result, world markets may be left with a surplus of 1.5 million barrels a day in the first half.
Yet growth in China’s 2016 oil consumption is seen lower as the world’s second-largest economy slows further and the government reins in tax breaks on auto purchases.
In its monthly report on Tuesday, the IEA said oil supply would outpace demand for at least another year and the oil market risked “drowning in oversupply”.
ANZ bank said prices were likely to come under more pressure after the release later in the day of the U.S. Energy Information Administration’s official storage data.
Brent crude oil prices averaged $52 a barrel in 2015, down $47 a barrel from the average in 2014.
Analysts expect crude stocks to have risen by 2.8 million barrels in the week ended January 15, according to a poll of eight analysts. The report also gave a clear cut “Yes” as an answer and reasons, “Unless something changes, the oil market could drown in over-supply”.
Oil prices leaped from 12-year lows on Thursday (Jan 21), lifted by a swing to optimism on equity markets after steep losses since the beginning of the year.
Marking a 13-year low, the price of the Organisation of Petroleum Exporting Countries (OPEC) basket of twelve crudes stood at $23.58 a barrel on Monday, compared to $24.74 on the previous Friday, said the organisation’s secretariat said.
Crude is down about 20% this year amid volatility in Chinese markets and speculation the removal of restrictions that capped Iran’s crude sales will help to prolong a global glut. US crude vaulted back toward $30 per barrel as hopes for easier monetary policy from Europe fueled a recovery in stock markets in European and on Wall Street. He said the price of oil will get worse before getting better, adding that the return of Iran into the mainstream will worsen the situation.
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HSBC chief executive Stuart Gulliver said that he expected the price of oil to settle at between $25 and $40 in one year’s time.
