Crude prices edged lower on Thursday as brimming US and Asian fuel inventories returned investors’ attention to a large global supply overhang, cutting short a price rally and restricting Brent crude futures to below the $50 a barrel mark.
International benchmark Brent crude oil futures were trading at $48.95 per barrel at 0132 GMT in early Asian trade, down 10 cents, after closing down 1.8 percent previously.
US West Texas Intermediate (WTI) crude futures were at $46.68 a barrel, down 9 cents, after falling 2.8 percent on Wednesday.
Traders said price falls this week had truncated a rally that pushed crude up by more than 20 percent earlier in August on talk of a potential deal by oil producers to freeze output in an effort to rein in oversupply.
Hopes of a deal were dampened by record output from the Organization of the Petroleum Exporting Countries (OPEC) and little prospect of voluntary restrictions.
“Brent also came under pressure after (OPEC-member) Iraq said it still isn’t producing as much oil as it should be, raising concerns that OPEC supply will continue to increase,” ANZ bank said on Thursday.
With output high, not just from OPEC but also other top producers like Russia, and the demand outlook shaky, analysts said there was little prospect of an end to the glut, which has pulled down crude prices from over $100 a barrel to their current sub-$50 levels since 2014.
“Ample inventories were due to weaker demand in Asia, but more generally were driven by excess supply generated by refiners maximising runs, notably to produce gasoline in the US,” BNP Paribas said.
“In Asia, China’s July economic statistics confirmed loss of growth momentum,” it added.
The French bank said that the “lacklustre demand prospects (and) the augmented capacity of the global refining system … suggest (that) a distillate supply overhang will persist.”