U.S. oil prices fall to over two-month lows on rising inventories

In its short-term market report, the U.S. Energy Information Administration said it expected the balance between supply and demand to move closer to equilibrium starting in 2016.

On the demand side, an economic slowdown in Asia, led by the region’s two biggest economies, China and Japan, has led to concern about slowing demand, although consumption has so far held up.

The market on Friday is expecting the latest USA oil rig count, which many see as barometer for activity in the industry.

Oil prices fell about 3 percent on Wednesday, hitting August lows, on worries Us crude inventories were piling up and Iraq was bringing on more supply that would intensify OPEC’s fight for market share.

United States benchmark West Texas Intermediate for delivery in December fell US$1.01 to US$40.74 a barrel.

Despite that report, Flynn said, ‘we think that with comments from OPEC that while they may not pump less oil, they may use their current production levels as a few kind of a ceiling, oil is getting a little bit of a rally today’.

WTI prices had pared a few losses in the immediate wake of supply data, after trading at the bottom of its range earlier Tuesday. “However, if oil settles beneath the $41.50 US level, a [fall under $40 a barrel] is a mere arms reach away”.

Oil companies have grappled with the downturn and a “lower for longer” price outlook by slashing spending, cutting thousands of jobs and delaying about $200 billion in mega-projects around the world. “We estimate this year investments in oil will decline more than 20 percent”.

“The OPEC meeting scheduled for December may shed a few light on how the organisation plans to tackle the global glut, but it remains unlikely that a cut may be implemented this year”, noted FXTM research analyst Lukman Otunuga.

The EIA also reported an increase in USA oil production last week to 9.2 million barrels a day.

Brent crude futures were down 34 cents at $47.10 a barrel. Oil stockpiles in developed countries are at the highest since the financial crisis as global supply outpaced demand growth, the group said in a report.