Oil prices fell further on Wednesday, with the international benchmark for crude sliding below $45 US a barrel.
The drop marked Brent crude’s first dip below that price point since November, as markets continued to worry about a glut in supply.
OPEC and 10 other oil-producing countries agreed in November to cut their production to combat a growing supply glut and push the market up. While Russia, Saudi Arabia and other nations involved in the deal have met their targeted cuts, an unforeseen increase in U.S. supply has countered these efforts. With the glut persisting, the outlook for oil prices has been dampened.
“As we see it, it is not the events that are putting pressure on prices, but above all the shift in sentiment, the previous optimism appearing to have virtually evaporated,” analysts at Commerzbank wrote in a note to clients.
The price for Brent crude was down $1.35 at $44.67 US a barrel in Wednesday afternoon trading.
Meanwhile, the price for U.S. light sweet crude was off by $1.15 at $42.36 US.
Weak prices mean that, all other things being equal, consumers can expect cheaper energy and car fuel.
The increased supply has been met with a “disappointing” demand for oil within the U.S., analysts said. The U.S. Energy Information Administration’s weekly petroleum data for the week ended June 16 showed a 2.5 million decrease in American crude oil inventories from the previous week, close to the “not insignificant” decrease of 2.7 million estimated by analysts at Commerzbank.
A recent report from the Paris-based International Energy Agency predicted next year’s increase in output by non-OPEC countries will be slightly higher than the increase in global demand.
Meanwhile, Wednesday’s appointment of new Saudi Crown Prince Mohammed bin Salman, a man famous for his combative political and economic policies against fellow OPEC member Iran, has placed the future of the supply-cutting plan under increased uncertainty.