Oil prices fell as renewed concerns over global demand and high stock levels halted a rally that pushed up prices by about 19 per cent over the past four days.
The recent rebound was driven by hopes that prices may have hit a bottom after a seven-month rout slashed oil futures by nearly 60 per cent and prompted major energy firms to cut spending on new production. But weak data from key consumer China has rekindled demand concerns, dragging on oil prices.
ANZ analysts said: “A steady stream of news regarding falling capital expenditure from the industry and a drop in U.S. oil rigs in operation appears to be the spark.”
“While sentiment appears to have shifted, volatility will remain high.”
Brent was 17 cents lower at $57.74 (£38) a barrel, after gaining almost 6 per cent on Tuesday and off a near six-year low of $45.19 reached in mid-January.
U.S. crude was down 76 cents at $52.29 a barrel. It settled up 7 per cent on Tuesday, after trading at $54.24 earlier in the day - above a near six-year low of $43.58 hit last week.
Morgan Stanley analysts said: “Longer-dated prices are moving towards a range that could allow producers to hedge, which would prevent any material slowdown in U.S. supply.”
Energy companies facing lower crude prices have cut rig count, with the number of U.S. rigs drilling for oil down by 61 in the week to January 9, the most in 24 years, data from oil services firm Baker Hughes has showed.
Oil major BP and top Chinese offshore energy producer CNOOC Ltd said they would deepen capital investment cuts this year to adapt to lower oil prices.
The outlook for oil demand has also been muddied by data showing China’s services sector grew at the slowest pace in six months in January.
However, some say lower oil prices will spur economic growth, which will boost demand for commodities including oil.
“Low oil prices and cheap money will lead to stronger global economic growth and much stronger oil demand than conventional wisdom would suggest,” PIRA Energy said in an email.
It forecasts global oil demand to grow by 1.5 million barrels per day in 2015, but warns the current supply surplus will overwhelm demand for the next six months.