Oil prices fall on uncertain global outlook
Crude oil prices fell as much as 2 percent on Tuesday, unwinding the previous day's steep rally, under pressure from uncertainty over whether global demand will be enough to erode a sky-high surplus. Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilized after losing more than half its value in a year, and the persistence of the highest global surplus in modern times.
There is evidence that U.S. shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency to issue more bullish forecasts for the market balance next year.
Capital Economics analyst Thomas Pew said there has been a loss of some half a million barrels of oil per day in U.S. production in the last couple of months alone.
But uncertainty is running high over the outlook for demand in top consumers such as China, as well as the resilience of the U.S. economy following the Federal Reserve's policy meeting last week.
"Certainly, nothing is certain. That's the only certain thing that there is. That being said, it does look like lower prices have finally started to take their toll on U.S. production," Pew said.
"All eyes are going to be on whether that continues," he said, adding that Capital Economics' forecast was for a gradual rise in oil prices over the coming years.
November Brent crude futures were down 68 cents, or 1.4 percent, at $48.24 a barrel by 1055 GMT, having hit an intraday low of $47.85.
On Monday, Brent rose as much as 3 percent.
Brent futures are set for a fall of more than 11 percent this month, bringing the year-to-date decline to 16 percent.
The physical markets have also turned gloomier this week.
A dearth of fresh tanker fixtures to ship North Sea crude to key customers in Asia knocked the premium of physical barrels of oil off a six-week peak on Monday.
U.S. West Texas Intermediate (WTI) crude futures for November delivery were down $1.17 at $45.79 a barrel.
The discount of U.S. crude prices to Brent <WTCLc1-LCOc1> has tightened to around $2.25 a barrel, from about $8 six months ago and is around its lowest this year.