US crude fell back below USD 30 a barrel as world oil prices extended their losses in Asia today after worries about the global supply glut returned to the fore.
After plunging to 12-year lows, prices soared late last week on hopes that plans for further economic stimulus measures in the Euro Zone and Japan would perk up demand.
But the rally fizzled out on Monday on stubborn oversupply fears.
At around 0215 GMT, US benchmark West Texas Intermediate for delivery in March was down 58 cents, or 1.91 per cent, at USD 29.76 and Brent crude for March was trading 50 cents, or 1.64 per cent, lower at USD 30.00.
Both contracts fell yesterday.
“The decline is not very surprising because oil fundamentals still remain weak,” said Daniel Ang, an analyst with Phillip Futures in Singapore.
“We’re looking at strong oversupply and not—so—outstanding demand,” he told AFP. “It is going to be very difficult to maintain higher prices.”
A strengthening US currency also helped depress demand for dollar—priced oil, which becomes more expensive for holders of weaker units.
The dollar climbed ahead of a meeting on Thursday of US central bank policymakers, with investors looking for signs of further hikes in US interest rates.
“The market would like to know exactly when they could expect the next interest rate increase. That’s what’s keeping the dollar very strong,” Ang said.
The market is also anticipating the return of Iranian oil exports, which would further add to the oversupply.
A day after Western economic sanctions were lifted last week, Iran announced a major boost in oil production, with the National Iranian Oil Company saying it had ordered output to increase by 500,000 barrels per day.