Oil prices fall as doubt persist over market tightening

Oil prices fall as doubt persist over market tightening

While the inventory draws keep piling on the United States, the global supply/demand situation for crude oil is still not balanced, and fears are that OPEC's now proposed end date of March 2018 for the cuts will prove to be too soon.

Oil prices fell Tuesday for a second-straight session, as traders awaited weekly data on U.S petroleum supplies.

After hitting over $58 per barrel, Brent crude oil, the global benchmark of the commodity, fell to around $56 p/b at the end of Monday's USA trading session.

Brent crude, the global benchmark, was down 85 cents, or 1.5%, at Dollars 55.94 a barrel by 2:19 pm ET (1819 GMT).

Oil dropped as OPEC's production increased last month, at a time when USA drillers are also ramping up.

The big draw in crude oil was only partially offset by an increase of 1.6 million barrels in refined gasoline stocks.

WTI light swet crude oil was down 17 cents at USD50.42 a barrel.

"The fourth quarter is not too kind to the price of oil, as we switch from summer demand to expectations of winter demand", said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney. More than 15 percent of total USA refining capacity was impacted by Harvey at its peak, with pipelines from the region operating intermittently and the federal government releasing oil from its strategic reserves in order to offset the market strains.

"Fundamentals may not yet be strong enough to support a continued rally, especially in growth-dependent commodities such as oil", Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, said in a quarterly outlook to investors. Meanwhile, the market reckoned with data showing that output from the Organization of Petroleum Exporting Countries increased last month and news that Libyan production is set to recover from a five-month low as the nation's biggest field restarts.

"What the market is always concerned about is as the price goes higher, the world produces more, and prices are capped", said Richard Fullarton, founder of London-based hedge fund Matilda Capital Management Ltd.

Although the headline draw was larger than expected, the sharp build in gasoline stocks had a significant impact in damaging confidence with some concerns over a potential sharper-than-expected seasonal drop in demand.

Russian President Vladimir Putin was taking the podium in the minutes before the start of Wall Street trading.

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