Oil slipped to a one-month low on Tuesday after a surprise fall in gasoline demand in the United States, the world’s largest oil consumer, and on doubts whether oil producers can agree an output freeze to dampen a global supply glut.
U.S. gasoline demand, one of the strongest pillars supporting oil consumption, fell in January for the first time in 14 months, U.S. Energy Information Administration data showed.
The world’s largest oil producers are due to meet in Doha on April 17 to negotiate an output freeze, but a jump in Russian oil production to a 30-year high in March has cast doubt over the chances of an output cap being agreed.
Brent crude, the global oil price benchmark, was down 26 cents at $37.43 a barrel at 1000 GMT (6.00 a.m. ET), its lowest since March 4.
U.S. futures fell by 21 cents to $35.49, also a one-month low.
“The market was surprised by two figures: Russian production at a 30-year high and U.S. gasoline demand dropping for the first time in 14 months,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
“As long as most speculative money is long-positioned, there is more room for closing positions and falling prices.”
Analysts at BNP Paribas agreed that oil prices could slide further, saying an emerging gasoline glut could add to a global overhang in crude output that exceeds demand by more than 1 million barrels of oil a day.
“Global oil balances will witness sizeable implied inventory builds in the first half of 2016, suggesting that the price of oil can easily revisit the lows seen earlier this year,” they wrote in a report.
The OPEC governor of Kuwait said on Tuesday that an agreement at the Doha meeting could freeze production at February levels or an average of January and February.
Nawal Al-Fuzaia also said that she expects Brent crude to average between $45 and $60 a barrel in the second half of this year and for supply and demand to balance by year-end.