Oil prices fell
Oil prices fell Tuesday, pushed lower for the fourth consecutive day as market sentiment continued to turn, despite a bullish report from the International Energy Agency.
The global benchmark, Brent, was trading down 1.4% at $49.66 a barrel midmorning in London. Its U.S. counterpart, West Texas Intermediate, was down 1.6% at $48.09 a barrel.
The International Energy Agency on Tuesday revised its demand forecast upward for this year by 100,000 barrels a day, to 1.3 million barrels a day from 1.2 million barrels a day. The demand will be led by emerging markets in India and China as the manufacturing industry grows, the report said.
The IEA also released its first demand forecast for 2017, for 1.3 million barrels a day.
But the body warned that should supply be restored in Nigeria and Canada there could be a dip in prices. Nigerian output fell 250,000 barrels a day to 1.37 million barrels a day in June, levels not seen in almost 30 years.
Gains to demand were limited as the IEA indicated that supply was strong from elsewhere in the world. Oil output in Kuwait and the United Arab Emirates was up in May by 120,000 barrels a day and 70,000 barrels a day, respectively.
Despite the report, market bullishness is dissipating as U.S. production shows signs of recovering. Late on Monday, the U.S.-based Genscape Inc. tipped a 525,000-barrel increase in U.S. crude stockpiles in the week ended June 10. Last Friday, Baker Hughes Inc. reported the number of rigs drilling for oil in the U.S. rose for the second-straight week.
"The worry is that when prices reach $60 a barrel, we will see new investments in shale exploration," Barnabas Gan, an economist at OCBC said.
The American Petroleum Institute will release fresh estimates Tuesday on the level of U.S. crude stocks, which could send prices tumbling further if it predicts a significant stock build.
Also hurting prices, financial markets have had a higher sense of risk aversion in the lead-up to Britain's referendum on leaving the European Union, known as "Brexit," on June 23.
"Oil prices are unable to ignore this negative market sentiment, especially since the majority of speculative financial investors are continuing to bet on climbing oil prices," said the Germany-based Commerzbank.
According to some analysts, in the scenario that Britain leaves the EU, the British pound will likely take a hit and the greenback will appreciate. As oil trading is conducted in dollars, a strong dollar usually bodes badly for those who trade in foreign currencies.