SINGAPORE: Oil prices resumed their decline in Asia on Wednesday, with global crude oversupply continuing to dampen investors’ sentiment despite occasional rallies.
Prices had risen the previous day after a four-day losing streak, as traders weighed a bearish price outlook from the International Energy Agency (IEA) and a lowered US estimate for crude production.
Oil prices have collapsed by more than half since mid-2014 with prices languishing under $50 a barrel, hurt by the supply glut and the decision by oil exporter grouping OPEC to maintain output to counter booming US shale production.
The Paris-based IEA, in a report Tuesday, forecast that oil prices would recover to $80 a barrel by 2020.
At around 7 a.m. on Wednesday, US benchmark West Texas Intermediate for delivery in December was trading 48 cents lower at $43.73 and Brent crude for December was down 29 cents at $47.15 a barrel.
“We continue to think the market will remain in surplus through most of 2016, which is likely to restrict the upside for prices, particularly over the fourth quarter of 2015 and the first quarter of 2016,” British bank Barclays said in a market commentary.
A strong dollar, fuelled by widening expectations that the US Federal Reserve will raise interest rates next month, has also been keeping a lid on prices.
Oil is traded in dollars and a buoyant US currency would make the commodity more expensive for those holding weaker units, lowering demand and prices.
“We expect the greenback to continue to be supported as we approach the likely lift-off in rates,” Singapore’s United Overseas Bank said, referring to a December 17 meeting of the Fed’s policy-setting Federal Open Market Committee.