By 0721 GMT, Brent was down over a dollar, or 2 percent, at $47.56 a barrel, while U.S. crude CLc1 was trading at $47.61 a barrel, down 87 cents.
“A war for output market share means oil prices are skewed to the downside. Funds are unwinding a large positive investment premium, but further selling is possible,” ANZ said on Thursday.
Wednesday’s 4.5 percent surge in Brent LCOc1, the biggest percentage gain since June 2012, had come as traders covered themselves on expiring options.
However, market sentiment remains bearish due to a supply glut, with international Brent crude futures falling below their U.S. WTI equivalents.
U.S. crude has been cheaper than Brent because soaring North American shale oil production has pulled down prices while the rest of the world market remained more tightly supplied.
But with oil producer club OPEC deciding late last year to maintain its output despite slowing Asian and European economies in order to defend its market share, including against surging U.S. competition, a glut has also appeared outside the United States, pulling Brent prices down to U.S. levels.
“We are lowering our Brent price forecast: to $50.25/barrel from $72.25/barrel in 2015; to $67.50/barrel from $83/barrel in 2016; and to $77.25/barrel from $90/barrel in 2017,” U.S. investment bank Jefferies International said on Thursday.
Jefferies said the use of floating storage would, in the near term, absorb barrels but noted that “those same barrels will eventually be delivered and could moderate a future price recovery”.
Adding to the downward pressure on prices, Russian output has reached levels not since seen the end of the Soviet Union.
ANZ bank said that it saw a 60 percent chance Brent would range between $40 and $60 a barrel in the first half of the year, a 30 percent possibility of prices falling to $35-45 during that time and only a 10 percent chance of prices going up to $60-80 a barrel. (REUTERS)