Oil falls on China economic woes, rising OPEC supply
Oil prices fell for a second session in Asian trade on Tuesday as worries about top energy consumer China and rising oil supply weighed on markets, although possible talks between OPEC and Russia on production cuts offered some support.
Brent for April delivery LCOc1 dropped 46 cents to $33.78 a barrel as of 0146 GMT (8.46 p.m. ET) after settling down $1.75, or 4.9 percent, in the previous session.
The front month contract for West Texas Intermediate (WTI) CLc1 was down 49 cents at $31.13 as after falling $2.00, or 5.9 percent, in the previous session. Despite the declines, U.S. crude is still nearly 19 percent above the more than 12-year low of $26.19 hit in mid-January. "(Prices) have just come back to reality a bit, although they are holding water above $30 a barrel," said Ben Le Brun, market analyst at Sydney's OptionsXpress, pointing to concern over rising oil supplies and weaker economic data.
Oil prices could nudge below $30 a barrel again if investors saw hopes fading of a deal between members of oil producers cartel OPEC and Russia on production cuts, he said.
Russian Energy Minister Alexander Novak and Venezuelan Oil Minister Eulogio Del Pino discussed the possibility of holding joint consultations between OPEC and non-OPEC countries in the near future, the Russian Energy Ministry said. But Goldman Sachs said it was "highly unlikely" OPEC producers would co-operate with Russia to cut oil output, while also being self-defeating as stronger prices would bring previously shelved production back onto the market.
Crude prices fell after China's purchasing managers index dropped to a three-year low in January, coupled with rising oil supplies, ANZ said in a note on Tuesday. "Rising supply also suggests further downside risk to short-term prices. Output from OPEC rose to 33.1 million barrels per day last month as Indonesia's membership to the group was reactivated," the note added.
Investors are waiting on a slew of economic data, including U.S. non-farm payroll and unemployment figures and producer prices from the Eurozone, to give oil markets further direction, Le Brun added.
That came as U.S. commercial crude oil inventories likely rose by 4.7 million barrels last week to a new record high of 499.6 million barrels, a preliminary Reuters survey taken ahead of industry and latest official data showed. Gasoline stocks likely rose 1.3 million barrels last week, while distillate inventories, which include heating oil and diesel fuel, were seen falling 1.7 million barrels.
The Reuters poll was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API), due out later on Tuesday, and the U.S. Department of Energy's Energy Information Administration (EIA), due for release on Wednesday. Elsewhere, production from Iraq's southern oil fields dropped to an average of 3.9 million barrels per day (bpd) in January from a record 4.13 million bpd the previous month, the oil ministry said.