Oil prices fell about 1 percent, to under USD $50 per barrel, on Monday due to oversupply in the United States (U.S.) and concerned investor sentiment over global economic growth and fuel demand. Both U.S. crude and Brent crude benchmarks fell more than 30 percent from early October through the end of November as a supply glut inflated global inventories. They have stabilized over the last three weeks, trading within fairly narrow ranges as oil producers have promised to cut production.
U.S. crude oil inventories were forecast to have fallen for the third consecutive week, while analysts expected a build in refined products last week. Six analysts polled ahead of reports from the American Petroleum Institute (API) and the U.S. Department of Energy’s Energy Information Administration (EIA) estimated, on average, that crude stocks fell 2.5 million barrels in the week to December 14.
Some investors doubt planned supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia would be enough to rebalance markets. OPEC and its allies have agreed to reduce output by 1.2 million barrels per day (bpd) from January, in a move to be reviewed at a meeting in April.
United Arab Emirates energy minister Suhail al-Mazrouei told reporters in Dubai on Monday that the global oil market was correcting, and he expected everyone to cut oil supply under the agreement reached earlier this month in Vienna. U.S. shale output is growing steadily, taking market share from the big Middle East oil producers in OPEC and making it harder for them to balance their budgets. Russian oil output has been at a record high of 11.42 million barrels per day (bpd) in December so far.
Increasing concerns about weakening growth in major markets such as China and Europe have also dampened the mood in oil and other asset classes. Broad stock declines in Europe and the U.S. on Monday dragged equity markets lower around the world, adding to a sell-off that has sent global shares near 17-month lows. Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, while the country’s industrial output rose the least in nearly three years as the economy continued to lose momentum.