Oil continues to decline amid fears of increased supply

Oil prices continued their descent in Asian trading on Wednesday, extending losses from the previous session where they fell over three percent to their lowest levels in six months. The decline is attributed to concerns about demand and excess supply in the market.

As of 0621 GMT, Brent crude futures for February dropped by 33 cents, or 0.45 percent, to $72.91 per barrel. Similarly, US West Texas Intermediate crude futures for January decreased by 29 cents, or 0.42 percent, to $68.32 per barrel.

The market faced headwinds in overnight trading on Tuesday, with stronger-than-expected US inflation readings for November reinforcing the belief that the Federal Reserve will not implement early interest rate cuts next year, potentially impacting consumption.

ANZ analysts noted that the weekly average of Russian crude exports surged to the highest level since July, intensifying concerns about oversupply. This has added skepticism about the effectiveness of the latest production cut agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as the OPEC+ alliance.

In its latest short-term energy outlook report, the US Energy Information Administration raised its supply forecast for 2023 by 300,000 barrels per day to 12.93 million barrels per day, compared to the previous report.

The outlook for a supply increase has set oil on a downward trajectory during the week, marking the continuation of a decline observed over seven consecutive weeks.

Investors are closely watching the Federal Reserve’s stance, with expectations of interest rates remaining unchanged. However, the focus will be on central bank officials’ perspectives on the economy and their projections for interest rates in the coming period.