Crude futures edged down Wednesday and hovered around bear-market lows ahead of the release of official U.S. oil stock data.
Brent crude, the global oil benchmark, fell 0.39% to $45.85 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were down 0.05% at $43.48 a barrel.
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Oil prices have been depressed since the Organization of the Petroleum Exporting Countries and other producers decided on May 25 to extend an agreement that withholds almost 2% of the global crude supply from the market.
OPEC's aim is to decrease the global glut of oil and raise prices, but the quantity of oil in storage has remained high.
The price of Brent has fallen by 19.8% since January, while WTI is down 21.8%--tipping it into bear-market territory.
Some analysts say investors are suffering from OPEC fatigue and are no longer responding to positive market signals, because the 14-nation cartel is pursuing a poor strategy to rebalance the market.
Money managers had placed a record number of bets that oil would rise on the back of the cartel's actions, but that optimism has since faded.
"OPEC's current policy has failed, in part due to member states destocking millions of barrels of crude from their own storage, at the same time as cutting production and reassuring the market that the rebalancing was on the way because output was down," analysts from Energy Aspects said in a note. "The fecklessness of this policy has destroyed the group's credibility, forcing bullish players out of the market."
Rising production from OPEC members such as Nigeria and Libya that were exempt from the cut are undermining the idea that the cartel can lift prices. Rising U.S. output is also weighing on the market.
The American Petroleum Institute's weekly estimate for U.S. crude supplies showed a 2.7-million-barrel decrease on Tuesday, along with a 346,000-barrel rise in gasoline stocks and a 1.8-million-barrel increase in distillate inventories.
Commerzbank analysts said investors weren't sufficiently cheered by the decline in oil in storage. Instead, "the market is currently focusing mainly on U.S. gasoline demand, which has tended to prove disappointing of late."
The Bank of Russia offered a sobering outlook on oil in its latest monetary-policy report, saying output growth in Libya, Nigeria and the U.S.--along with a slowing economy in China and ebbing demand for energy--could see prices fall to $25 a barrel by mid-2018. Crude hasn't been that low since 2003.
"A strong revival of U.S. shale oil and a strong revival in Libya have basically canceled OPEC's cuts, so the market is trading on the back of shale," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "The market is saying we have enough oil for 2018. We don't need any more."
In focus for oil traders on Wednesday is weekly U.S. inventory data from the Energy Information Administration.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.05% to $1.42 a gallon. ICE gasoil changed hands at $413.75 a metric ton, up $1 from the previous settlement.
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(END) Dow Jones Newswires
June 21, 2017 07:16 ET (11:16 GMT)