Global oil falls below $45 as oversupply concerns weigh
Oil dropped to a two-month low today, amid concerns that the persistent global glut of crude and refined products isn't shrinking quickly enough.
Brent crude, the global benchmark, was last down 1.46 per cent to $44.94 per barrel. Meanwhile, its US counterpart, West Texas Intermediate crude, slumped 1.95 per cent to 43.33 per barrel.
Hedge funds almost tripled their short positions on oil, according to data released today by the US Commodity Futures Trading Commission. This suggests they increasingly believe that the recent rally is over.
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There have been signs that global oil production is falling, due to producers scrapping uneconomic exploration projects. But high inventories and weak global demand growth have limited its impact on prices.
Barclays analysts said that economic concerns will weigh on oil demand in the third quarter, however market balances are expected to tighten further in the following three months as growth recovers and more producers reduce their output.
Analysts at consultancy Energy Aspects also struck a more optimistic note, saying that the first "green shoots" of normalcy in supply-and-demand balances are starting to creep through.
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"Crude markets are slowly tightening and are now more resilient in the face of falling refinery demand for crude," they said.
"We do not mean that the rebalancing is over, or even close to being over, but nevertheless, we are now in a new market paradigm where the steps towards normalcy begin."