Oil. Picture: REUTERS
Oil. Picture: REUTERS

Singapore — Oil prices dropped more than 1% on Tuesday, falling for a third straight session, as reports of inventory builds and forecasts of record shale output in the US, currently the world's biggest producer, stoked worries about oversupply.

Concern about future oil demand amid weakening global economic growth and doubts over the impact of planned production cuts led by the Opec were also pressuring prices, traders said.

International benchmark Brent crude oil futures were at $58.90 per barrel at 3.40am GMT, down 71 US cents, or 1.2%, from their last close. Brent has fallen more than 4% in the past three sessions so far.

US West Texas Intermediate (WTI) crude futures were down 60c, or 1.2%, at $49.27 per barrel.

Both US crude and Brent have shed more than 30% from early October amid swelling global inventories, with WTI currently trading at levels not seen since October 2017.

"Opec is reducing production to attempt to rebalance. However, data from Cushing still shows an oversupply," said Hue Frame, portfolio manager at Frame Funds.

"This isn't being viewed favourably by the market, especially in combination with slow global growth."

Inventories at the U.S. storage hub of Cushing, Oklahoma, which is the delivery point for the WTI futures contract, rose by more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday.

Meanwhile, oil production from seven major US shale basins is expected to climb to 8.03-million barrels per day (bpd) by the end of 2018 for the first time, the US Energy Information Administration said on Monday.

"Rising US shale production levels along with a deceleration in global economic growth has threatened to offset Opec+ efforts as markets weigh the potential of looser fundamentals," said Benjamin Lu Jiaxuan, an analyst at Singapore-based brokerage firm Phillip Futures.

With oil prices now falling, unprofitable shale producers will eventually stop operating and cut supply, but that will take some time, analysts said.

Supply curbs agreed to by Opec and its Russia-led allies might not bring about the desired results as US output goes on increasing and as Iran keeps pumping out more oil, analysts said.

The cuts are also coming from currently high production. Oil output from Russia has been at a record high of 11.42-million bpd so far in December.

"The strength of Opec+ cuts will be weighed against Iranian production levels in lieu of US waivers till quarter two of 2019,"  Lu Jiaxuan said.

"Market confidence remains extremely delicate amid looming economic uncertainties as investors contemplate on weaker fuel demand beyond 2018."

China's industrial output in November rose the least in nearly three years as the world's second-largest economy lost further momentum.