Oil. Picture: REUTERS
Oil. Picture: REUTERS

Singapore — Oil markets lost steam on Tuesday, giving back earlier gains, as a deteriorating economic outlook and a surge in US production outweighed expected supply cuts by the producer cartel Opec.

Brent crude oil futures, the international benchmark for oil prices, were at $66.55 a barrel at 3.13am GMT, down 24c, or 0.4% from their last close.

US West Texas Intermediate (WTI) crude futures were at $57.07 a barrel, 13c, or 0.2%, below their last settlement.

Oil prices are almost a quarter below their recent peaks in early October, weighed down by surging supply, especially from the US.

US crude oil production has soared by almost 25% this year, to a record 11.7-million barrels a day.

This comes amid widespread market expectations of an economic slowdown, which saw Asian stock markets tumble on Tuesday, adding to sharp losses on Wall Street during the previous day.

As a result, financial traders have become wary of oil markets, seeing further price downside risks from the soaring 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 past 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 barrels a day.

“We expect Opec to agree to a supply cut at its next official meeting on 6 December,” French bank BNP Paribas said.

The bank therefore said it expected Brent to recover to $80 a barrel before the end of the year.

“In 2019, we expect WTI to average $69 a barrel and Brent $76 a barrel,” BNP said.

The International Energy Agency (IEA), which represents the interest of oil consumers, on Monday warned Opec and other producers of the “negative implications” of supply cuts, with many analysts fearing that a spike in crude prices could erode consumption.