Oil prices drop after jump the day before; glut, economy concerns drag

SEOUL: Oil fell on Thursday after soaring 8 percent in the previous session, as worries over a glut in crude supply and concerns over a faltering global economy pressured prices even as a stock market surge offered support.

Brent crude oil futures were down 22 cents, or 0.4 percent, at $54.25 a barrel by 0634 GMT. They rose 8 percent to $54.47 a barrel the day before.

U.S. West Texas Intermediate (WTI) crude futures fell 0.56 percent to $45.96 per barrel. They jumped 8.7 percent to $46.22 per barrel in the previous session.

Both crude benchmarks are down roughly 40 percent from highs touched in October.

Global stocks rebounded on Wednesday on the back of the Trump administration's attempt to shore up investor confidence and a report on strong U.S. holiday spending.

Shim Hye-jin, a commodity analyst at Samsung Securities in Seoul, said oil prices were still low despite gains made the day before.

"But if OPEC's cuts are fulfilled, WTI prices are expected to rise to $50-60 a barrel, while Brent is expected to go up to between $58-70 a barrel next year."

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed at a meeting earlier this month to limit output by 1.2 million barrels per day (bpd) starting in January.

Oil production has been at or near records highs in the United States, Russia and Saudi Arabia, with the U.S. pumping 11.6 million bpd of crude, more than both Saudi Arabia and Russia.

Although U.S. sanctions have put a cap on Iran's oil sales, Tehran said on Wednesday that its private exporters have had "no problems" selling its oil and that 3 million barrels could be sold soon to non-government traders.

"Markets need more concrete evidence on improving fundamental metrics and to bring the supply-demand relationship back to balance before oil prices can reach a real bottom," said Margaret Yang, market analyst for CMC Markets in Singapore.

Meanwhile, potentially bolstering oil prices, a preliminary Reuters poll on Wednesday forecast that U.S. crude inventories would drop 2.7 million barrels in the week to Dec. 21, marking their fourth straight week fall.

The American Petroleum Institute's (API) inventory data is due on Thursday, while the government's Energy Information Administration (EIA) is set to release its report on Friday.