Oil slips below $56 on expectations over supply to linger
NEW YORK (Reuters) - Oil slipped below $56 a barrel on Wednesday, pressured by expectations that oversupply in world markets would persist and an industry report saying U.S. crude
stocks rose from a record high.
The American Petroleum Institute said on Tuesday crude stocks increased by 1.6 million barrels last week. Stocks are already at a record, according to the U.S. government's Energy Information Administration (EIA), which issues its latest report on Wednesday.
Crude had come under pressure on Tuesday from International Energy Agency (IEA) forecasts of continued supply growth in the United States to 2020 despite lower prices, and of a possible further rise in stocks to a record high this year.
"The supply growth in 2015 is likely to continue unabated, albeit at a somewhat lower rate," Fereidun Fesharaki at Facts Global Energy said in a note to traders.
"This all means a weak market in 2015 and even lower oil prices. Demand rebound will not save the oil market."
Brent crude futures LCOc1 were down 90 cents at $55.53. U.S. crude CLc1 traded at $49.52, down 50 cents, having reached a high of $51.14 earlier in the session.
After more than halving since June, oil prices have rallied by over 20 percent in the last four weeks. Kuwait's Oil Minister Ali al-Omair said on Wednesday that crude prices could rise to $60 a barrel by the end of the year.
But analysts agreed with IEA predictions that following the crash, oil prices would stabilize well below the highs of more than $100 a barrel seen in the last three years.
Jefferies Bache analysts said Brent and U.S. crude, known as West Texas Intermediate (WTI), would fall in the short term as the market responded again to oversupply.
"We still expect fresh WTI lows and an ultimate decline towards the $40 area," they said in a note to traders. "Assuming our $40 WTI target is achieved, a nearby Brent price in the $48 area would be implied."
"All in all, we are maintaining a bearish stance."
Adding further pressure on prices, the EIA kept its 2015 and 2016 domestic oil output forecasts virtually unchanged from the previous month.
The EIA expects U.S. oil production in 2015 to be 9.3 million barrels per day, slightly lower than the 9.31 million bpd forecast in last month's short-term energy outlook.