Oil prices fell for a second session in Asian trade on Tuesday as worries about top energy consumer China and rising oil supply weighed on markets, although possible talks between OPEC and Russian Federation on production cuts offered some support.
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“Russia yesterday reported a rise in its oil production in January to just under 10.9 million bpd (barrels per day), which is a new high since the break-up of the Soviet Union”, Commerzbank said in a report.
“Indications are pointing to a fairly chunky build tomorrow”, said Matt Smith of Clipper Data, referring to the Department of Energy’s weekly petroleum report scheduled on Wednesday.
According to Persian Gulf Arab OPEC representatives, it is still unclear how Iranian crude oil production is affecting the oil market now that the Western sanctions have been lifted off. Iran is expected to ramp its daily oil production by a million barrel in 2016, which is likely to overflow the global oil market.
Russian Energy Minister Alexander Novak and Venezuelan Oil Minister Eulogio Del Pino discussed the chances of holding consultations between Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries soon.
US crude, also known as West Texas Intermediate (WTI), fell 27 cents to $29.61, after ending the previous session down $1.74, or 5.5 percent.
“What’s important is not the minister’s words, but the position of Russia, Saudi Arabia and other large oil-producing countries, which have given hope to the imbalance in supply and demand on the oil market”, explained Andrei Solozhkov, analyst at the investment company UFS. The news helped boost the ruble by more than 10% and lifted oil prices along with it. The reduction would’ve helped bring an end to one of the largest oil surpluses we’ve ever seen. They point out that failure to reach agreement at a meeting that was both highly publicized and anticipated in world markets would only add momentum to the fall in oil prices.
Forecasts for mild weather over the next couple of weeks and the looming onset of spring has also weighed on oil prices, sending United States heating oil futures down 2% and USA gasoline futures down more than 5%.
The elite Wall Street firm believes oil prices are poised to plunge to new lows below $26 a barrel – despite talk of OPEC coming to the rescue by cutting production.
He said the discussions could be on making production cuts of up to 5 percent per country.
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Last week, global benchmark Brent crude price increased more than 30 percent from a disappointing 12-year low. “Output from OPEC rose to 33.1 million barrels per day last month as Indonesia’s membership to the group was reactivated”, the note added.
