Oil prices fall as investors' faith in rally wanes
Oil prices fell on Tuesday, reflecting growing concerns that a two-month rally may be in danger of fizzling, while analysts forecast another rise to record levels for U.S. crude stockpiles.
The oil price has risen by more than 45 percent since midFebruary ahead of a meeting next month between the world's major producers to discuss an output freeze to support prices. But there is growing scepticism about the outcome of meeting.
"The amount of verbal intervention, which has obviously helped the market greatly over the past two months, combined with a production slowdown in the U.S., has probably taken (oil) as far as it can, now the market really wants to see some action," Saxo Bank senior manager Ole Hansen. "We're seeing more and more commentators raise the flag and saying 'have we seen too much, too soon?' in terms of the rally across the sector."
Brent crude futures LCOc1 fell 58 cents to $39.69 a barrel by 0846 GMT, having lost some six percent in the last six trading days, while U.S. crude CLc1 fell 47 cents to $38.92.
OPEC and other major suppliers, including Russia, are to meet on April 17 in Doha to discuss an output freeze aimed at bolstering prices. But with ballooning global inventories, signs that some OPEC members are losing market share, plus little evidence of a strong pick-up in demand, analysts said oil is likely to trade in a range.
"The numbers continue to suggest a supply glut and I suspect that more talk is relevant out of OPEC and Co to help the price stand up or to help it remain relatively stable," Jonathan Barratt, Chief investment officer at Ayers Alliance in Sydney, said. "The likes of Russia and the likes of Iran ... are cutting deals left right and centre just to get cash flow." US commercial crude oil stockpiles were expected to have reached record highs for a seventh straight week, while refined product inventories likely fell, a preliminary Reuters survey showed late on Monday.