Crude oil prices are in the doldrums since OPEC and non-OPEC producers reported a huge increase in crude oil supplies for the month of September. OPEC output reached a new record level and Russian production led to a big growth in non-OPEC production. Traders’ sentiments were further impacted by the report of a consistent growth in the U.S. oil rig counts.
After surging to 11-month high amid production cut deal in Algeria, U.S. crude oil price tumble back below $50 a barrel during Monday trade. The threat of rising U.S. production and a stronger dollar are also weighing on crude oil prices.
International benchmark Brent crude oil declined 0.8% to settle around $51.52 per barrel, after touching a session low of $51.16 a barrel. West Texas Intermediate (WTI) declined 42 cents to settle below $50 a barrel, after striking a session low of $49.47 a barrel.
Analysts said crude oil traders had gathered a high number of long positions, and they are considering selling ahead of their contracts’ expiry date.
Market sentiments were also impacted by the statement of Iran’s minister, who said their production is still well below pre-sanction levels. Iran’s current oil production is around 3.85 million barrels per day.
Crude oil prices are under pressure despite OPEC producers’ deal to cut supply between 32.5 million barrels a day from their current supplies of 33.6 million barrels a day. Russia is also likely to join the deal in the coming days, as it was the key player behind the OPEC deal.
However, the threat of production growth from North American producers is weighing on prices. Several analysts had kept their recent price forecast for crude oil prices, as they believe shale producers have established their footprints to expand their production around $50 a barrel.
The most unfortunate sign for crude oil price is a stagnant demand. Global crude oil demand hasn’t been rising compared with the growth in supplies. Though emerging markets have shown some signs of stabilization in the last couple of months, but Brexit related concerns and bearish fundamentals of European markets are slowing global economic growth.
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