Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN
Boats float in front of the Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN

London — Benchmark oil prices fell on Tuesday, set to snap a four-day winning streak amid concerns about rising global supplies as oil cartel Opec weighs production cuts.

Growing fears of an economic slowdown, which saw European and Asian stock markets tumble again, added further pressure on crude.

Brent crude futures, the international benchmark for oil prices, were at $66.07 a barrel at 10.16am GMT, down 72c, or 1.08%, from their last close. US West Texas Intermediate (WTI) crude futures were at $56.63 a barrel, down 57c, or 1%.

The head of the International Energy Agency (IEA) warned of the effects of geopolitical instability on prices. “We are entering an unprecedented period of uncertainty in oil markets,” Fatih Birol told a conference in Norway.

Oil prices were around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the USs, as well as a slowdown in global trade. US crude production has soared almost 25% this year, to a record 11.7-million barrels per day (bpd).

Amid the uncertainty, financial traders have become wary of oil markets, seeing further downside risk to prices from the growth in US shale production as well as the deteriorating economic outlook. Portfolio managers have sold the equivalent of 553-million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.

Funds now hold a net long position of just 547-million barrels, less than half the recent peak of 1.1-billion at the end of September, and down from a record 1.484-billion in January.

Opec cuts expected

Concerned about an emerging production overhang, similar to the one that led to a price slump in 2014, Opec is pushing for a supply cut of 1-million to 1.4-million bpd.

“We expect Opec to agree to a supply cut at its next official meeting on 6 December,” French bank BNP Paribas said, adding  that it expected Brent to recover to $80 a barrel before the year-end.

“In 2019, we expect WTI to average $69 a barrel and Brent $76 a barrel,” BNP said. The IEA, however, warned Opec and other producers of the “negative implications” of supply cuts, with many analysts fearing a spike in crude prices could erode consumption.