Oil prices declined on Tuesday as market analysts cautioned against optimism for fuel demand growth, despite OPEC-led production cuts aimed at stabilizing markets. U.S. West Texas Intermediate (WTI) crude fell to $56.30 per barrel, a 0.5% drop from its previous settlement, while Brent crude dropped to $65.36 per barrel.
Energy analysts at TS Lombard highlighted that global oil markets continue to grapple with excess supply from the second half of 2018, with OECD commercial inventories remaining above the five-year average. This has created ongoing pressure for price recovery, even as U.S.-China trade tensions show signs of easing.
Slower economic growth in Europe and Asia, coupled with improved fuel efficiency, has dampened demand projections. Bank of America Merrill Lynch noted that 2018 marked the weakest refined product demand growth since 2011. Analysts also pointed to a 2017 image showing Libya's oil infrastructure, underscoring long-standing supply challenges.
OPEC and its allies have maintained production cuts of approximately 1.2 million barrels per day since early 2019. However, the group delayed decisions on extending these cuts beyond April until June, prolonging market uncertainty. Meanwhile, U.S. crude output surged past 12 million barrels per day in February 2019, setting records since mid-2018.
The surge in U.S. production has exacerbated price pressures on WTI, while OPEC's focus on heavy crude has widened the Brent-WTI price differential. The spread between the two benchmarks averaged an $8.50 discount for WTI since 2016, according to TS Lombard analysts.
