Oil dipped on Friday, falling back from the previous session's rally as analysts reminded the market of high US inventory numbers and the continued oversupply of crude.
Brent, the global crude benchmark, was down 1.9 per cent at $US47.97 a barrel for cargoes loading in October. Trade in WTI was also down, dropping 2 per cent to $US45.01 a barrel on the New York Mercantile Exchange.
The market continues to focus on oversupply. On Thursday, data from the US Energy Information Administration showed that stocks rose by 2.6 million barrels in the week to 458 million barrels, which was higher than the inventory number quoted by the American Petroleum Institute earlier in the week.
Oil markets received further bad news after Saudi Arabia rejected calls by Venezuela for an emergency meeting of the Organisation of the Petroleum Exporting Countries. Commerzbank said that there was also no sign of any cooperation between OPEC and non-OPEC producers, such as Russia and Mexico, both of which have also ruled out cuts in production.
"In other words, the oil market will remain oversupplied in the short term," the bank said in a note.
Analysts continue a steady stream of bearish notes on crude. US investment bank Goldman Sachs lowered its short- and midterm price forecasts for WTI to reflect a higher-than-expected oversupply in the global oil market. In a commodities research note, the bank forecast that WTI could fall to $US38 a barrel in the next month before recovering to $US42 by the end of 2015. By mid-2016 it believes it will fall again to $US40 before recovering to $US45 a barrel by the end of 2016.
"On our updated forecast, we expect the sharp deterioration in producer financial conditions that has occurred recently to persist on the recognition that the rebalancing of supply and demand is proving to be far more difficult than previously expected," the note said.
The price declines come despite the International Energy Agency saying in a report that the US and other non-OPEC producers could be forced into the largest production cuts since the early 1990s. The IEA believes that tight US oil supply, the majority of which is shale oil produced by hydraulic fracturing, is expected to drop by 400,000 barrels in 2016.
These sentiments are shared by Amrita Sen, chief oil analyst at London-based Energy Aspects.
"The capex cutback is significant and therefore will have a negative impact on future production although we believe the real impact is only likely in 2017," Mr Sen said.
There was bad news for US refiners as the spread between crude oil benchmarks Brent and WTI dropped to under $US3 a barrel on Friday, the lowest level since June. The spread at was $US2.95 in morning trade. US refiners prefer a wider spread as it increases the profit margins of products, most of which are sold using the Brent benchmark.
