Oil prices slid in early Asian trade on Wednesday after touching their lowest in nearly six years the previous session, with analysts predicting further falls as oversupply plagues the market.
Oil tumbled 5 percent to near six-year lows on Tuesday, with theBrent crude international benchmark briefly trading at par to U.S. prices for the first time in three months as some traders moved to take advantage of ample U.S. storage space.
February Brent crude LCOc1 had dropped 40 cents since its last settlement to $46.19 a barrel by 0238 GMT. U.S. crude for February CLc1 was trading at $45.60 a barrel, down 29 cents. [O/R]
Analysts said prices would stay under pressure as oversupply hurts both the American WTI contract and globally traded Brent, with some traders beginning to book ships for oil storage.
“Our latest forecast calls for Brent oil to average $45 per barrel during 1Q15 (the first quarter of 2015),” Nomura bank said on Wednesday.
Oil storage trends also imply further price falls, with U.S. stocks possibly approaching 80 percent of capacity by the upcoming spring season, according to U.S.-based PIRA Energy Group.
“The last time the United States built inventories in December was in the middle of the financial crisis in 2008,” the firm said.
Outside the United States, some of the world’s biggest oil traders have booked supertankers to store at least 25 million barrels at sea in recent days, seeking to take advantage of the crash in crude prices and make a profit down the line.
“Once floating storage starts, there is very little support on the downside for Brent spreads,” Energy Aspects said.
U.S. crude prices have been cheaper than Brent almost without interruption as soaring North American shale oil production pulled down prices while the rest of the world market remained more tightly supplied.
But with oil producer club OPEC deciding late last year to maintain its output despite slowing Asian and European economic growth and to defend its market share, including against surging U.S. competition, a glut has also appeared outside the United States, pulling down Brent prices close to U.S. levels.
“The closing gap looks to be solidifying Saudi Arabia’s strategy to curb shale production and protect market share,” ANZ bank said.