The recent upward movement in oil prices could not be sustained as the commodity fell after demand outlook and oversupplies overwhelmed hopes of a production cut. Any expected action by OPEC and others has been played down.
Brent and WTI extend losses
Brent crude for April delivery dipped by over 3% or just over a dollar and was seen trading around $33.19 per barrel. The front-month contract for West Texas Intermediate (WTI) fell by 2.93% or $0.93 to $30.70, briefly falling below $30 again.
The only major development yesterday was that Russia’s energy minister and Venezuela oil minister informally discussed the prospect of holding a meeting between OPEC and non-OPEC members during the upcoming days. However, the new information failed to soothe the anxiety of market participants.
Meanwhile, Goldman Sachs (NYSE:GS) reiterated that any cooperation between OPEC and Russia is ‘highly unlikely’. Some Russian oil companies have projected a fall in output this year, which could also prevent Russia from reaching an agreement with OPEC members. Saudi Arabia remains a tough producer to convince among all. Assessing the current scenario, analysts have even projected that oil could fall below $30 per barrel again for an extended period.
Meanwhile, the magnitude of the oil oversupply can be seen from a report by Russia’s Energy Ministry that showed oil output in the region had increased to 10.88 million barrels a day in January from 10.83 million barrels per day in December.
The picture is no different in the U.S., which saw its oil stock rising by 4.7 million barrels to 499.6 million barrels, as reported by Reuters. The data from the American Petroleum Institute will be awaited later today to further gauge oil supply conditions.
Weakness in oil prices has already done its damage to oil companies, as BP plc (NYSE:BP) has reported its worst annual loss in the last 20 years. iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) traded 5.08% lower now at $4.86.