Crude futures have stabilized early Thursday in Asia following sharp declines in the U.S., but investor sentiment continued to be battered by data showing that the market remains awash in surplus oil.
Overnight, oil tanked by nearly 4% to the lowest level since November, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated.
Compounding the woes was the unexpected increase in gasoline stocks, surprising many traders and analysts who expected much of the excess gasoline to be mopped up during the U.S. summer driving season. Data show gasoline demand has fallen for three weeks straight.
Market sentiment was already weak before the EIA readings, after the both the global oil cartel and top energy watchdog International Energy Agency noted that the global supply growth rate continues to outpace demand and will remain so until next year at least. That's despite the ongoing output cuts by the Organization of the Petroleum Exporting Countries and 10 other non-U.S. producers.
The IEA predicts non-OPEC production, mainly U.S. supplies, will grow by 1.5 million barrels a day in 2018, while global daily demand will only see a rise of 1.4 million barrels.
"To me, that's the biggest alarm bell. There are no signs of shale producers holding back their production even though prices have been dropping," said Phin Ziebell, an economist at National Australia Bank.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $44.69 a barrel at 0200 GMT, down 0.2% in the Globex electronic session. August Brent crude on London's ICE Futures exchange largely unchanged at $46.98 a barrel.
July Nymex reformulated gasoline blendstock was flat at $1.43 a gallon and diesel was up 0.2% to $1.41, while ICE gasoil rose 0.2% to $419.50 a metric ton.
With global inventories still high and U.S. output increasing, the decision by OPEC and Russia to prolong their production cutback plans through March next year has come under fire.
Calling it an "error", Bjarne Schieldrop, chief commodities analyst at SEB Markets, said the decision would only stoke U.S. production higher.
Still, some say as declining oil prices could help weed out the high-cost producers in the U.S. and hopefully dampen output.
"Talk that some shale producers have seen their price hedges roll off may lead to a slowing in U.S. production," said Stuart Ive, a client manager at OM Financial.
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(END) Dow Jones Newswires
June 14, 2017 22:50 ET (02:50 GMT)