Oil prices fell as concerns mount that a rally since January is fizzling out, while analysts forecast another rise to record levels for US crude stockpiles.
US oil was down 30 cents at $39.09 a barrel at 0553 GMT, after finishing down 7 cents at $39.39, the previous session.
Brent fell 35 cents to $39.92. On Monday it settled down 17 cents at $40.27 a barrel.
US commercial crude oil stockpiles were expected to have reached record highs for a seventh straight week, while refined product inventories likely fell, a preliminary Reuters survey showed late on Monday.
The poll of eight analysts, taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA), estimated, on average, that crude stocks rose 3.2 million barrels in the week ended March 25th.
The API will release its data on Tuesday at 2030 GMT, while the EIA will publish its data on Wednesday at 1430 GMT.
Both oil benchmarks are up about 50 per cent from 12-year lows hit in mid-February but the oil market has taken on a weaker tone in the past week, along with other commodities.
“The numbers continue to suggest a supply glut and I suspect that more talk is relevant out of Opec and Co to help the price stand up or to help it remain relatively stable,” said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
He was referring to plans by the Organisation of Petroleum Exporting Countries and other major suppliers including Russia to meet next month to discuss an output freeze in the hope they can support prices.
The plans for the April 17th meeting in Qatar have been a major component of the rally.
But with stockpiles high and signs that some OPEC members are losing market share, along with few signs of demand returning, prices are likely to trade in a range.
“The likes of Russia and the likes of Iran ... are cutting deals left right and centre just to get cash flow,” said Mr Barratt.
“Given the absence of economic numbers supporting increases in demand we continue to go sideways.”
Most analysts are predicting the end of the year-and-a-half long slump, but also betting that there is little upside in the near future.
Barclays said net flows into commodities totalled more than $20 billion in January-February, the strongest start to a year since 2011, and prices could fall 20 to 25 per cent if that were reversed.
“Were such a scenario to unfold, the price of oil could fall back to the low $30s,” it said on Monday.
Reuters
