Crude oil futures were pressured on Tuesday by oversupply and worries the dollar will strengthen when the U.S. Federal Reserve eventually raises interest rates.
Benchmark U.S. crude futures CLc1 were trading at $46.17 per barrel at 0628 GMT (1.28 a.m. ET), up just 3 cents from their last settlement after falling in the previous session due to a rise in stockpiles.
Internationally traded Brent LCOc1 dropped 8 cents to $48.71, down 8 cents from its last close, under pressure from Russian production hitting a post-Soviet peak while China’s demand outlook weakened.
“Crude continues to remain under pressure due to emerging supply-side news and slowing Chinese demand. Russian oil output broke a post-Soviet record in October for the fourth time this year. News from Iran is also painting a negative picture,” ANZ bank said in a morning note.
Meanwhile, Gulf oil producers are delaying some field maintenance until next year to keep production high and reduce costs as they forecast ongoing low oil prices in 2016.
An expected dip in U.S. oil production as a result of low prices is unlikely to be enough to significantly reduce a glut, which is seen remaining at over 1 million barrel per day on average for 2015.
“Our framework suggests that (U.S.) production would drop by 35,000 barrels per day in 2016 at the current rig count under our well deferral scenario, more than the 20,000 barrels per day year-on-year decline estimated a week ago,” Goldman Sachs said. But it added that “a rapid draw-down of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016”.
U.S. crude oil stockpiles likely rose by 2.7 million barrels last week, growing for a sixth consecutive week as supply outstrips demand, a Reuters poll showed. Industry group the American Petroleum Institute (API) will issue its preliminary inventory data on Tuesday before official numbers on Wednesday from the U.S. government.
At the same time, traders are keeping an eye on U.S. monetary policy as a rise in American interest rates would likely push up the dollar against other currencies, making oil imports more expensive in some other countries.
“With the focus on U.S. economic data this week, anything supportive of the Fed raising rates could see commodity markets come under some pressure,” ANZ said.
(Reporting by Henning Gloystein; Editing by Joseph Radford)