Oil prices slumped on Tuesday, July 11, as global oversupply encouraged several banks cut their price forecasts. Benchmark Brent crude LCOc1 was down 30 cents at $46.58 a barrel by 0945 GMT. U.S. crude CLc1 was 25 cents lower at $44.15.
“The fundamental mood has taken a turn for the worse,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum.
He said BNP Paribas had slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018, Reuters reports.
Barclays bank also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively. Signs of strong short-term demand helped stem losses.
Gasoline demand tends to increase in the northern hemisphere summer as U.S. drivers take to the road. Weekly U.S. gasoline demand data “compares favorably to the five-year average and miles driven also continue to grow year-on-year,” Bank of America Merrill Lynch said in a note.
Crude prices are about 18 percent below their 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries to cut production from January.
OPEC, along with Russia and some other major exporters, has agreed to hold production at about 1.8 million barrels per day (bpd) below levels pumped at the end of last year.
The limits will be maintained until March 2018 in an attempt to drain a global glut, but production elsewhere has risen as OPEC has held back.
U.S. oil production C-OUT-T-EIA has jumped more than 10 percent over the last year to 9.34 million bpd. Nigeria and Libya, OPEC-members who are exempt from production limits, have also increased output.
“OPEC has yet to address this increase in production,” Goldman Sachs said in a note.
Without further cuts by OPEC and other producers or a significant fall in oil inventories or a decline in U.S. drilling, Goldman said crude prices could fall below $40 per barrel.