Oil price tumbles as slow recovery stokes negative sentiment
Oil reversed earlier gains to slip into negative territory today, as increased Opec production and more US oil rigs left crude investors feeling glum.
Brent crude, the global benchmark, fell 2.11 per cent to $42.61 per barrel this afternoon, having risen as much as 0.74 per cent to $43.85 earlier in the day.
Meanwhile, its US counterpart, West Texas Intermediate crude, shed 2.2 per cent to $40.72.
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"Sentiment remains quite negative following the price slump recently. It is negative because rebalancing takes longer than some market [participants] thought before," Eugen Weinberg at Commerzbank told Reuters.
He continued: "Reuters data shows yet another increase in Opec production, helped by production hikes in Nigeria and Iraq. There is also data pointing to yet another increase in the rig count in the US."
The black stuff has fallen from a 2016 high of more than $50 per barrel due to signs that the market recovery will be slower than initially anticipated. This is being exacerbated by a glut of oil products, which isn't being burnt through by motorists despite the fact it's driving season in the US.
Market mavens are also anxious about softer demand growth, due to economic uncertainty stemming from last month's Brexit vote.
Earlier today, analysts at investment bank Barclays warned that crude could fall further from its current level.
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"Demand growth remains lacklustre and has not made significant inroads into the inventory overhang. There is no better time to do that than during summer, but summer is already halfway over," it said.
"The market is quickly approaching another shoulder season and, with the macroeconomic picture worsening and Saudi Arabia unlikely to exhibit much restraint as Iran seeks incremental market share, refineries are going to find themselves in the line of fire."
"The run cuts are already beginning in the US East Coast, but we think there is more pain to come for refineries as well for the broader crude complex in the last several weeks of this quarter."