Oil prices continued their southbound journey for the second straight day as there were more concerning developments than soothing updates. The latest blow to oil prices came after ‘The Organisation of Petroleum Exporting Countries’ (OPEC)  poured cold water on the hopes that the oil glut will resolve early or within a reasonable time.

Supply grows faster

The organisation said on Monday that it sees the demand for crude to be lower than what it has earlier anticipated. The unabated supply from rivals continues despite lower prices, which in turn, is increasing the supply in the market.

Though some of the major oil producers such as Russia, Saudi Arabia, Qatar and Venezuela are pushing for the freezing of output at January levels, by other producers, the impact of such freeze will be negligible given the oversupply of 1 million barrels per day.

OPEC sees slowdown demand

CMC Markets strategist, Jasper Lawler, commented that the oil rallied beyond $40 per barrel on hopes that the OPEC will be able to convince other producers to freeze output at current levels. During the European trading hours, Brent Crude, the global benchmark, posted a loss of 2.40% to $38.58 while the West Texas Intermediate slipped 2.39% to $36.29.

Another risk hovering on oil prices is the fact that Iran has increased its oil production to 3.1 million barrels per day now from 1 million barrels per day in January. Thus, lack of action by the oil producers coupled with higher production could be unfavourable for oil rebound. However, Morgan Stanley’s projection that there are 30% chances for the global economy to slip into recession has fuelled some buying interest in oil.

This is the reason market participants have added more bearish bets in crude futures while bullish to bearish bets have touched the highest level since May, according to JBC Energy. Lawler said that it would be surprising if crude prices would touch $27 per barrel level again as crude futures positions are indicating otherwise.