LONDON: Oil steadied on Tuesday after almost a week of sharp falls, but the outlook remained weak amid oversupply and several banks cut their price forecasts.
Benchmark Brent crude was down 10 cents at US$46.78 a barrel by 0820 GMT. US light crude was 5 cents lower at US$44.35.
Signs of strong short-term demand capped losses. Gasoline demand tends to increase in the northern hemisphere summer as US drivers take to the road.
Weekly US gasoline demand data “compares favorably to the five-year average and miles driven also continue to grow year-on-year”, Bank of America Merrill Lynch said in a note to clients.
However, it also said: “US gasoline demand may have peaked in absolute terms last year”, adding that it expected no structural tightness once the peak demand summer season was over.
Crude prices are about 18% below their 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries to cut production from January.
OPEC, along with Russia and some other major exporters, has agreed to hold production at around 1.8 million barrels per day (bpd) below levels pumped at the end of last year.
The limits will be maintained until March 2018 in an attempt to drain a global glut, but production elsewhere has risen as OPEC has held back.
US oil production has jumped more than 10% over the last year to 9.34 million bpd. Nigeria and Libya, OPEC-members who are exempt from production limits, have also increased output.
OPEC exported 25.92 million bpd in June, 450,000 bpd more than in May and 1.9 million bpd more than a year earlier, according to Thomson Reuters Oil Research.
“OPEC has yet to address this increase in production,” Goldman Sachs said in a note.
Without further cuts by OPEC and other producers, Goldman said crude prices could fall below US$40 per barrel.
Harry Tchilinguirian at BNP Paribas said he had slashed his forecasts for Brent by US$9 to US$51 a barrel for 2017 and by US$15 to US$48 for 2018.
“The simple truth is that OPEC and Russia have to contend with the fact that there is output growth elsewhere diluting their efforts at reducing supply,” Tchilinguirian said.
Barclays bank cut its 2017 and 2018 Brent forecasts to US$52 a barrel for both years from US$55 and US$57 respectively.