Oil prices fell below $50 a barrel this afternoon as traders focused on brimming crude inventories, although equities markets provided a modicum of support.
US crude oil futures were trading 8 cents lower at $49.90 a barrel by 1.06pm, while they were off an earlier low of $49.41. ICE Brent crude was down 26 cents at $52.80.
Yesterday's gains on the oil market were fuelled by a rise on Wall Street. Asian stock markets also rose early today and European equities hit a two-month high.
Oil has hovered around $50 for most of this month. Falls below that threshold have been perceived as a buying opportunity, but gains have been limited by weak demand and rising crude stocks, which in the US have reached their highest level in nearly 19 years.
“Stronger equities are providing support to crude oil but the commodity is starting to feel fatigued, pivoting around $50 a barrel without any momentum,” Olivier Jakob of Petromatrix said.
The $50-a-barrel level is also key in that members of the Organization of the Petroleum Exporting Countries have said it is a good compromise given the weakness of the global economy.
The producer group has argued prices need to be higher to support investment for the long term, but for the near term, it is mindful of the need to nurse oil-consuming nations back to economic health.
Oil is around $100 below an all-time high of nearly $150 a barrel hit in July last year, but OPEC's action to limit supplies has helped to pull the market back from a low of $32.40 in December.
Industry observers and analysts have estimated OPEC has delivered around 80 per cent of its agreements to reduce output by 4.2 million barrels per day from last September.
They have also said it could struggle to tighten output much more.
Monthly crude allocations have shown leading exporter Saudi Arabia has cut supplies to some of its customers for May, but Nigeria and Angola have added extra cargoes to their April and May loading schedules, traders have said.
Reuters