U.S. crude was down 77 cents at $60.89 a barrel at 1130 GMT after falling nearly $2 on Tuesday.
Oil has retreated over $17 from its July record high of $78.40 in its steepest decline for 15 years.
London Brent was down 73 cents at $61.44.
The slide has revived discussion about what price would trigger a cut in OPEC production to stem the fall.
Saudi Oil Minister Ali al-Naimi on Tuesday described prices as reasonable for the first time since the market scaled record highs. "The oil industry is convinced that this price is reasonable," Naimi told reporters in Riyadh.
"Prices now are rewarding to both producers and consumers and their impact on the global economy is small."
Some OPEC ministers have signaled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The OPEC basket stood at $58.85 on Tuesday.
"It all depends now on how fast the price declines," said BNP Paribas analyst Eoin O'Callaghan.
"It would be difficult for OPEC to justify a cut with the U.S. price above $60 and concerns about a U.S. economic slowdown. But it is our view that sometime in the near future OPEC will have to cut."
INVENTORIES
Data due later on Wednesday is expected to show brimming U.S. fuel inventories rising further.
Supplies of distillates, which include heating oil, were forecast to rise by 1.9 million barrels, a Reuters poll found. Distillate stocks were already near seven-year highs last week.
Winter fuel inventory levels have led to growing perception among investors that the world's biggest oil consumer is well prepared to meet cold-weather demand.
Stocks are also high in other large consumers Japan and Germany.
"There is no support at all for crude oil coming from product markets," said O'Callaghan. "We are seeing all the factors that supported the market in the summer unwind."
Price falls are hurting investment funds that have poured billions of dollars into energy markets as they bet on tight supplies for years ahead.
"Lots of people are losing money and hedge funds must liquidate their long positions," said Tetsu Emori, chief strategist at Mitsui Bussan Futures. "Fundamentals are also getting weaker."
The $9 billion Amaranth Advisors fund told investors earlier this week it may be hit by billions of dollars in losses due to the sharp drop in natural gas prices.
Oil supply risks related to Iran's nuclear program also appeared to be easing further as U.S. Undersecretary of State Nicholas Burns said Washington would support further talks by European negotiator Javier Solana to find a diplomatic solution.
"Clearly now a serious negotiation phase will follow so the chances that Iran's oil will be withdrawn from the market any time soon have gone from low to very low," said Tobin Gorey, commodity strategist with Commonwealth Bank of Australia.
Post a Comment