Crude oil prices were barely changed on Tuesday as traders bet on continued high production from the Organization of Petroleum Exporting Countries (OPEC) ahead of its meeting later this week.
US crude was trading at $41.93 a barrel at 0427 GMT on Tuesday, up 28 cents, but still down more than 10 per cent since the start of November.
Internationally traded Brent futures were at $44.77 a barrel, up 16 cents.
“There is a real risk that we could see lower prices,’’ said Ric Spooner, chief market analyst at Sydney’s CMC Markets. “The prospects for demand-growth are not large enough to go into the supply overhang.’’
China's economy
China’s economy showed renewed signs of weakness, with its manufacturing falling to a three-year low, an official survey showed on Tuesday. Although Japan’s manufacturing accelerated, it was at low levels.
In physical markets, Dubai crude fell to the lowest since December 2008, averaging $41.691 per barrel for November, according to price-reporting agency Platts.
OPEC meeting
OPEC’s policy meeting on Friday is not expected to change the organisation’s strategy, adopted last year, of pumping oil vigorously to protect its market share against US shale drillers and other producers.
ANZ said on Tuesday it expected to see Saudi Arabia, OPEC’s biggest producer, keep oil production steady in the face of declining prices.
WTI crude could fall through $40 per barrel in coming weeks if crude oil stocks do not decline in line with seasonal patterns, the bank said.
Financial traders are acting accordingly, with hedge funds’ bullish wagers on US crude falling to a more than five-year low amid concerns that a drop in US oil output was not enough to offset a global supply glut.
US shale output
US government data showed no meaningful decline in shale output despite falling rig counts, adding to a glut that is seeing 0.7-2.5 million barrels per day produced beyond demand.
ECB policy meet
Oil traders are closely watching a European Central Bank policy meeting this Thursday.
“If we saw selling of the dollar and buying of the euro, it could support the oil prices and give us a bit of a rally,’’ said CMC Markets' Spooner.
A weaker dollar is a positive for oil prices as it makes greenback-denominated contracts cheaper for those holding other currencies.
The dollar dipped slightly on Tuesday after nearing a 13-year high against a basket of currencies.
“It’s really a bit of an ECB wild card at the moment,’’ Spooner said.