Oil prices extend losses as glut worries persist
Brent LCOc1 for December delivery had fallen 36 cents to $47.18 a barrel by 1.45 a.m. ET, after settling the previous session down 45 cents.
U.S. crude CLc1 for December delivery dropped 52 cents to $43.46 a barrel, having ended the day before down 62 cents.
The U.S. benchmark broke technical support, dropping 65 cents, to hit a nine-week low earlier in the session on Tuesday.
An expected further build in U.S. crude stocks last week again raised concerns of an oversupplied market, said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
U.S. production cuts – from a peak of around 9.6 million barrels a day to around 9.1 million – and optimism over demand hasn’t translated into higher prices, he said.
“There’s minor potential support (for U.S. oil) from the early September low around $43.20 and just below that the 61.8 percent Fibonacci retracement around $42.80,” he said, adding Brent had some support from previous lows between $45.98 and $46.93.
U.S. commercial crude stockpiles likely rose for a fifth straight week, by an average of 3 million barrels to 479.6 million, in the week ended Oct. 23, a preliminary Reuters survey showed.
While stocks of distillates, which include diesel and jet fuel, were seen falling 2 million barrels, storage utilization for distillates in the U.S. and Europe is nearing historic highs, according to a Goldman Sachs report on Monday.
“Inventories … (and) U.S. production numbers continue to disappoint the market,” said Ben Le Brun, market analyst at Sydney’s OptionsXpress.
Longer-term, non-OPEC supply could fall next year for the first time since 2008 as deep cuts in capital expenditure by publicly traded companies lead to a 700,000 barrel per day fall in production to 52.7 million bpd, investment bank Jefferies said in a note on Tuesday.
Investors are also waiting for the outcomes of key policy meetings this week, Le Brun said.
That includes the outcome of a U.S. Federal Reserve Open Market Committee policy meeting which starts later on Tuesday and China’s fifth plenum, a meeting of the Communist Party’s central committee, that began on Monday.
Oil prices could get support from short covering if investors think the Fed will take a dovish view toward interest rates at its meeting, Spooner said.
“The Fed and a weaker dollar could save the day, as could improved supply statistics. That could still mean that this downswing might turn out to be a correction of the latest rally not the beginning of a major move lower,” Spooner said in a blog post.
China’s plenum is expected to set a 7-percent annual growth target in its 13th Five-Year plan, a blueprint for economic and social development between 2016 and 2020.