Oil prices fell nearly 4 percent on Wednesday, pressured by ample supply and concerns about demand being curbed by slowing economic growth. Oil futures extended losses as US equities turned lower after the prospect of economic stimulus from China boosted stock markets in Japan and Europe.
-- British crude oil production to rise
"The failure of oil markets to move higher on the back of this macroeconomic optimism calls fresh attention to the oil market's weak direct physical fundamentals," Citi Futures energy futures specialist Tim Evans said in note. Crude oil futures have been under pressure from concerns about swollen inventories, high global production and the increasing likelihood that Iranian barrels will return to export markets even as slowing growth in China threatens demand. Brent crude fell $1.94, or 3.92 percent, to settle at $47.58 after climbing 4 percent in the previous session.
US crude dropped $1.79, or 3.9 percent, to settle at $44.15, having eased on Tuesday as trading resumed after the Monday's Labour Day holiday. Labour Day is the traditional end of the US summer driving season. Gasoline demand in the United States has been supportive for oil prices at a time when the global demand picture is clouded by worries about China's economy.
The US Energy Information Administration cut its forecast for 2015 and 2016 world oil demand growth in its monthly report. Traders awaited a fresh snapshot of US oil inventories from industry and government, starting with American Petroleum Institute data due at 4:30 pm EDT. Analysts surveyed by Reuters expected crude stocks to have risen 900,000 barrels last week.
While Saudi Arabia's crude oil production dipped by 100,000 barrels per day in August, the Organisation of the Petroleum Exporting Countries continued to produce close to record volumes. Russia and Mexico have indicated they will not cut production, cooling speculation that some producers might organise to lower output to support prices.
Britain's oil and gas industry association said the country's output was set to post a gain in 2015, the first in 15 years, reflecting investment in more efficient technology. Oil prices are off more than 50 percent since June 2014 because of the global supply glut. In recent weeks, oil rallied in volatile trading after falling to 6-1/2-year lows when a stock market slide in China sent global equities and commodities prices tumbling.