LONDON — Oil prices fell on Tuesday, extending the previous session’s sharp losses caused by prospects of another increase in supplies.
Around 1200 GMT, Brent North Sea crude for delivery in October had lost 36 cents to stand at $48.80 a barrel compared with the close on Monday.
US benchmark West Texas Intermediate (WTI) for October delivery gave up 28 cents at $47.13 a barrel.
The losses were far less acute however compared with the drop on Monday, when prices tumbled by around $1.50 a barrel.
After a seven-session rally that put oil into a bull market – a 20 percent jump in prices from recent lows – the commodity has taken a hiding since the start of this week.
On Monday, WTI and Brent contracts shed around 3.0 percent of their values, mainly as a result of Iraq signaling a likely increase in crude output, according to traders.
“Oil prices are on the back foot as the oversupplied outlook trumps any hopes of coordinated producer action to support the market,” oil brokers PVM said in a note to clients on Tuesday.
Both main oil contracts surged last week as it emerged that the OPEC producers club and its rivals will meet next month, with speculation they could discuss ways to tackle an oversupplied market.
“Global oversupply is now back in focus,” said Dorian Lucas, analyst at energy research group Inenco.
“Even with OPEC and Russian collusion to freeze production, crude oil supply would still be in abundance. The rally in crude oil prices that began at the start of August was well overdone and not in line with supply and demand fundamentals,” he said, adding that further losses were expected.
“However, this will be dependent upon movement in the value of the dollar, which has been weakening since the Federal Reserve decided to defer an interest rate rise in July’s committee meeting.”
A weaker US currency makes dollar-denominated crude cheaper for holders of rival currencies, boosting demand. The opposite tends to occur when the greenback strengthens.