Oil prices fell about 2 percent on Thursday, extending recent weakness on concerns over surging U.S. crude production and slack global demand, particularly in light of the ongoing trade dispute between the United States and China.
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Brent crude oil futures were down $1.06, or 1.7 percent, to $60.26 a barrel by 11:03 a.m. EST (1603 GMT). U.S. crude futures fell $1.00 to $51.31 a barrel, off 1.9 percent.
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The Organization of the Petroleum Exporting Countries (OPEC) in its monthly market report cut its forecast for the average demand for its crude in 2019 to 30.83 million bpd, down 910,000 bpd from the 2018 average.
OPEC said its output fell 751,000 barrels per day in December, suggesting it was on its way to fulfilling terms of a pact to cut production between those nations and other producers, including Russia.
Even as OPEC and allied exporters cut production, however, U.S. output has surged close to 12 million bpd in the latest week, and some traders and investors are concerned that growth in global supply this year will outpace demand.
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“That’s going to weigh on the market at least until we get some new information,” including from OPEC, said Thomas Saal, senior vice president of INTL Hencorp Futures in Miami.
Still, Saal said, investors had already expected increasing U.S. production and priced it into the market, “so that’s why prices are down a little bit and not down a lot.”
U.S. output has climbed by 2.4 million bpd since January 2018 and stockpiles of crude and refined products have risen sharply, U.S. Energy Information Administration data showed.
In response to the drop in price in the second half of last year, OPEC and non-members plan to cut production by a joint 1.2 million bpd this year.
Oil is still about 20 percent above the lows reached in late December, but analysts said Brent has been trading in the low $60s and U.S. crude in the low $50s due to ongoing nervousness about relations between Washington and Beijing and China’s economic outlook.
“Brent needs to move past $62 before we can talk about $65,” BNP Paribas head of commodities Harry Tchilingurian told the Reuters Global Oil Forum.
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“From there, the door will be open to target $70, (if) we do not have negative news emerging around U.S.-China trade talks that caused high levels of angst and de-risking last December.”
(Additional reporting by Amanda Cooper in London, Henning Gloystein in SINGAPORE and Colin Packham in SYDNEY; Editing by Dale Hudson and David Gregorio)
