Oil prices have dropped after US crude hit three-month highs, with analysts warning that such gains may not be sustainable as oversupply concerns continue to outweigh strong demand.
Brent crude futures LCOc1 were down 50 cents and traded at $40.57 per barrel, while the US crude CLc1 fell 32 cents at $37.97 per barrel, Reuters reported.
The European Central Bank (ECB) is expected to announce further measures to stimulate the Eurozone economy.
This will strengthen the dollar against the Euro and hit oil imports that are dollar-denominated.
ECB may reduce the deposit rate for funds from commercial banks in a bid to encourage banks to lend more money.
The news agency quoted French bank Societe Generale saying: "The ECB will cut deposit rates by 20 bps (basis points) and extend its bond buying programme by one year. This could be bullish for the dollar and bearish for oil."
The fall in gasoline inventories is believed to have overshadowed high crude inventories.
At present, the focus is on a potential agreement between the Organization of the Petroleum Exporting Countries (OPEC) producers, led by Saudi Arabia, and non-OPEC members led by Russia to freeze output.
A slowdown in China’s oil demand has accounted for 37.5% of world oil demand growth since 2010 and is expected to have an impact on crude prices.
Image: The US crude CLc1 fell 32 cents at $37.97 per barrel. Photo: courtesy of Feelart/ FreeDigitalPhotos.net.