Oil prices declined on Thursday after an OPEC minister signalled that output would remain elevated, raising speculation the global oil glut would persist for a while longer.
Brent crude for May delivery declined 1.6 percent to $55 a barrel. It had traded at a lot of $54.07 after rallying more than $2 on Wednesday.
US crude for April delivery also tumbled, touching a session low of $42.75. It would later consolidate at $43.73 a barrel, declining 2.1 percent.
Kuwait’s oil minister Ali al-Omair told reporters on Thursday that the Organization of the Petroleum Exporting Countries (OPEC) had little choice but to keep production elevated as it fought for market share against North American and European producers. The 12-member oil cartel vowed last year to keep output elevated despite plunging price points. OPEC officials have long maintained that the oil market would eventually stabilize. Prices had increased by around a third between January and February, but have since trended lower.
US crude production remains elevated, having climbed to a new record high for ten consecutive weeks. US crude stockpiles rose by another 9.6 million barrels 488.5 million barrels last week, the Energy Information Administration reported on Wednesday.
Oil prices rallied on Wednesday after the Federal Reserve said it would be cautious in raising interest rates, which resulted in a massive selloff of the US dollar. The Fed dropped the word “patient” from its policy statement, but lowered its median estimate of the federal funds rate at the end of the year, a sign policymakers would adopt a slow and steady approach to rate normalization. The Federal Reserve’s “dot plot” chart showed the federal funds rate at 0.625 percent by the end of 2015, well below the December estimate of 1.125 percent.
Brent rallied more than $3 after the Fed statement, eventually closing at $44.91 a barrel.
Crude prices are forecast to decline further in the coming months before rebounding in the latter half of the year. The changing nature of the energy market, combined with lower demand in China and record output in the US, lead many speculators to believe that oil prices are unlikely to return to their hay day of over $100 a barrel.