Crude oil futures slipped towards $37 per barrel on Wednesday as the market remained under pressure due to slowing demand and high supplies, while forecasts that a cold snap in Europe and the United States would be short-lived also weighed on prices.
Crude prices have plunged by two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States led to a global surplus of between half a million and 2 million barrels per day.
More recently, a slowing demand outlook, especially in Asia but also Europe, has started dragging on prices.
Front-month US West Texas Intermediate crude futures were trading at $37.22 per barrel at 0621 GMT, down 65 cents or 1.72 percent from their settlement in the previous session.
Brent was down 33 cents at $37.46 a barrel.
Earlier in the session, the benchmarks hit lows of $37.11 and $37.22, respectively. Traders said the drop was largely due to the closing of 2015 trade books and a weak 2016 outlook. Crude prices could come under more pressure from forecasts that the upcoming cold weather in Europe would be short-lived. US crude and Brent had both rallied about 3 percent in the previous session on hopes that a drop in temperatures would buoy demand for oil for heating purposes.
But weather data in Thomson Reuters Eikon shows that average continental European temperatures are expected to drop from around 5 degrees Celsius currently towards and slightly below the seasonal norm of 2.4 degrees by January 3 before rising to as high as 6-8 degrees by Jan. 7. For most of the United States, a brief cold period is also not expected to last for much more than a week.
Oil prices could, however, draw some support if data shows a drawdown in US weekly oil stocks.
A Reuters poll of nine analysts estimated, on average, that crude stocks fell 2.5 million barrels in the week ended December 25. The US Department of Energy's Energy Information Administration will publish its report later in the day. "We believe that inventories have more chances to decrease than to increase and thus, would think that prices should be moving upwards," Singapore-based Phillip Futures said.