Oil returns to sub-$60 levels

The price of a barrel of Brent crude oil slipped back below the $60 level on Thursday, dragged lower after data showed US crude inventories posted another large weekly rise. Furthermore, a potential increase in output from Saudi Arabia elevated worries over global oversupply.

Data from the American Petroleum Institute showed that inventories last week increased almost three times more than analysts were expecting, as crude stocks in the US rose by 14.3 million barrels last week instead of the 3.2 million forecast.

Oil was pressured lower on the news, but there is scope for further declines if the next report confirms the large build-up of oil stocks. Investors and market movers will be watching the upcoming report from the US Energy Information Administration later today. If the data is confirmed, it will be the largest weekly increase in barrels of crude since records on the data began in 1982.

However, this negative sentiment could be mediated by the weekly report on US rig-count numbers, which are released every Friday. If the number of operating oil rigs declines again it will likely see crude erase its losses.

News that the world’s biggest exporter of oil, Saudi Arabia, is looking to increase production to almost ten million barrels per day also aided crude’s decline today.

The outlook on oil is mixed, however, data from the International Energy Agency forecasts that prices will average around $55 per barrel in 2015. But the agency expects there to be no imminent recovery, as it believes prices will top out at $73 per barrel and in five years will only recover to $60 a barrel.

"[Oil’s recovery] will be comparatively limited in scope, with prices stabilising at levels higher than recent lows but substantially below the highs of the last three years," IEA said in its Medium-Term Oil Market Report that came out earlier in the month.