Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil prices fell more than 2% on Wednesday, weighed down by a weaker demand outlook and a rise in US crude inventories, despite expectations of extended supply cuts led by Opec.

Brent crude futures, the international benchmark for oil prices, were down $1.69, or 2.71%, at $60.60 a barrel by 9.07am GMT.

US West Texas Intermediate crude futures were down $1.56, or 2.93%, at $51.71.

The US Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and US crude production on Tuesday.

A surprise increase in US crude stockpiles also kept oil prices under pressure.

"Investors have been concerned about the recent rise in stockpiles in the US," ANZ bank said in a note.

US crude inventories rose by 4.9-million barrels in the week ended June 7 to 482.8-million barrels, data from the American Petroleum Institute (API) showed on Tuesday. That compared with analyst expectations for a decrease of 481,000 barrels.

Trade tension between the US and China, the world's two biggest oil consumers, also weighed on prices. US President Donald Trump said he was holding up a trade deal with China.

European shares pulled back from three-week highs on Wednesday as this month's recovery rally ran out of steam on the back of soft Chinese factory activity and trade frictions.

Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018.

With the next meeting of Opec set for the end of June, the market is looking to whether the world's major oil producers will prolong their supply cuts.

Opec, along with nonmembers including Russia, have limited their oil output by 1.2-million barrels per day since the start of 2019 to prop up prices.

Goldman Sachs said in a note that an uncertain macroeconomic outlook and volatile oil production from Iran and others could lead Opec to roll over supply cuts.

"We expect such an outcome to only be modestly supportive of prices with our third-quarter Brent forecast at $65.5 per barrel," Goldman added.

The energy minister of the United Arab Emirates, Suhail bin Mohammed al-Mazroui, said on Tuesday that Opec members were close to reaching an agreement on continuing production cuts.

Opec is set to meet on June 25, followed by talks with its allies led by Russia on June 26. But Russia suggested a date change to July 3 to 4, sources within the group previously told Reuters.