Oil prices have dropped amid fears over a global economic slowdown and oversupply, cancelling out most of the gains recorded in the previous session.
Front-month US crude contract fell $1 per barrel, or 2.08%, to reach $47.17, while Brent crude futures plunged $1, or 1.75%, to stand at $56.24 a barrel, Reuters reported. During the previous session, Brent soared by nearly 2%.
With the fresh fall in prices, the futures have resumed declines witnessed earlier in the week due to concerns of excess supply.
JLC chief oil analyst Xi Jiarui was quoted by the news agency as saying: “Wednesday’s recovery was short-covering. Investors quickly moved their attention to deteriorating fundamentals in the oil markets, including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production.”
Earlier this month, producer cartel OPEC and other oil producers, including Russia reached an agreement to reduce production by 1.2 million barrels per day (bpd) to address supply glut and to shore up prices. The OPEC supply cuts will be enforced from next month.
Oil prices reached their highest levels in four years in early October, but have since lost more than 30%.
Saudi Arabia energy minister Khalid al-Falih stated that global oil stocks are likely to fall by the end of the first quarter. However, he added that the market is still vulnerable due to political and economic factors.
A further fall in WTI prices was prevented by US inventory data released by the Energy Information Administration (EIA).
According to the data, US crude stockpiles fell for the third consecutive week, decreasing by 497,000 barrels in the week ending 14 December.