According to Olivier Jakob, analyst at the Switzerland-based Petromatrix, the dynamics of the market are being controlled by short selling and short covering, market terms for selling a crude contract and then buying it back later for a lower price.
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According to Goldman Sachs, the potential proposal by OPEC members and non-OPEC producers to cut down on oil production would result in record highs. USA gasoline supplies probably fell by 1.5 million barrels last week, cutting stockpiles that are at the highest seasonal level in at least two decades, according to a Bloomberg survey before a government report on Wednesday.
“A sustainable pick-up in disrupted production would lead us to lower our oil price forecast with WTI prices needing to average $45/bbl next year to accommodate an additional 500 kb/d of supply for example”.
Goldman Sachs said that if OPEC and other producers such as Russian Federation decide to freeze oil output at the current levels, the move would leave production at record highs, and the supply and demand for oil would probably not be balanced.
Crude oil prices fell further in Asia on Wednesday on a spurt in US industry figures for stockpiles last week, but there was evidence that gasoline demand was up with a fall in supplies as the Labor Day weekend approaches.
The report caused oil prices to jump on Tuesday.
Global benchmark Brent crude oil futures LCOc1 were trading at $50.37 per barrel at 0057 GMT, down 51 cents, or 1 percent.
Oil extended its biggest loss in three weeks before the release of United States. crude inventory data on Wednesday, while Goldman Sachs. cautioned that any Opec deal to freeze output may only deepen the global oversupply.
Many analysts remain skeptical of the effort to freeze production.
The third-largest producer in the Organization of the Petroleum Exporting Countries, Tehran has been boosting output.
A two-year long selloff in oil has severely hurt the economies of Venezuela, Iraq and Nigeria.
He said he could see prices drifting closer to $45 a barrel over the next few days.
In London, Brent North Sea crude for October added 80 cents to US$49.96 a barrel.
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“We are seeing a little reaction on the API data which has posted higher inventories”, said Ric Spooner, chief market analyst at CMC Markets.
