Oil traded further below $47 a barrel on Wednesday after an industry report said U.S. inventories increased, reviving concerns that a three-year supply glut is far from over.
The American Petroleum Institute (API) said on Tuesday U.S. crude inventories rose by 851,000 barrels, while analysts expected a decline. Inventories of gasoline and distillates also increased, the API said.
“The report was disappointing,” said Tamas Varga of oil broker PVM, although he added that the downside reaction of prices to the API figures had been “muted” so far.
Brent crude was down 15 cents at $46.50 a barrel at 0846 GMT. It reached a seven-month low of $44.35 on June 21. U.S. crude fell 24 cents to $44.00.
A rise in U.S. stocks would suggest global supplies are still ample despite the effort led by the Organization of the Petroleum Exporting Countries to cut output by 1.8 million barrels per day (bpd) from January 2017.
The producers are trying to get rid of a supply glut which prompted prices to slide from above $100 a barrel in mid-2014.
OPEC and its allies agreed on May 25 to extend the supply cut into 2018, but Brent has fallen from as high as $54 then on rising production from the United States and from Nigeria and Libya, two OPEC members exempt from cutting output.
Nonetheless, some analysts believe that the selloff was overdone.
Traders will be awaiting the U.S. government’s official supply report for confirmation of the API figures. The Energy Information Administration releases its report at 1430 GMT.
Ian Taylor, head of the world’s largest independent oil trader Vitol, said Brent will stay in a range of $40-$55 a barrel for the next few quarters as higher U.S. production slows a rebalancing of the market.
Analysts at JBC Energy in a report saw room for prices to recover.
“While the physical crude market remains steady at best, it is worth noting there is now significant room for speculative support for prices to develop if a catalyst were to emerge,” JBC said.
