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Weak
manufacturing reports from China, the United States and Europe
undermined global equities, while a stronger-than-expected build
in U.S. crude stocks drove oil market sentiment down, analysts
said.
Wednesday's fall compounded an 8 percent drop in Brent and U.S.
crude prices on Tuesday, which ended a 25 percent three-session
surge, the largest three-day gain since 1990.
"A rise of around 25 percent in three consecutive days was not
going to be sustained," BNP Paribas oil analyst Harry
Tchilinguirian said. "The underlying fundamentals are bearish."
Brent crude for October was down 70 cents at $48.86 a
barrel by 1130 GMT. U.S. crude for October fell $1.00 to
$44.41 a barrel.
"Financial market turmoil is undermining global economic growth
and reducing the demand for inventory which is especially
negative for oil prices," PIRA Energy Group said.
Natixis analyst Abhishek Deshpande said: "China in particular is
bearing down on commodities."
Oil prices retreated after data from industry group the American
Petroleum Institute on Tuesday showed U.S. crude stocks surged
by 7.6 million barrels to 456.9 million in the week to Aug. 28.
Analysts in a Reuters poll on Tuesday expected U.S. crude stocks
to have remained flat last week, with gasoline stocks seen down
by 1.3 million barrels.
The market is expected to hold steady until official inventory
data is released by the U.S. Energy Information Administration
later on Wednesday, analysts said.
Some traders argue the oil market may be about to see another
big sell-off.
Hedge fund manager Pierre Andurand said U.S. crude could move
towards a range of $25-$50 a barrel over the next two years.
"The market will remain oversupplied in 2016 and 2017," Andurand
told the Financial Times. "We need low prices for longer to
rebalance the market. There are no quick fixes.”
A global glut of oil caused by high U.S. production and record
crude pumping in the Middle East has been weighing on prices.
Despite this, ConocoPhillips and Husky Energy Inc on Tuesday
said they would start production at two new Canadian oil sands
projects, expecting to produce around 178,000 barrels per day.
Other analysts say crude prices have fallen too far, too fast
and should recover gradually over the next year.
A Reuters poll of analysts on Tuesday forecast Brent would
average $62.30 a barrel in 2016 and U.S. crude $57 a barrel.
(Additional reporting by Keith Wallis in Singapore; Editing by
Dale Hudson)
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