Delhi: Crude oil prices erased earlier gains Friday to fall for a fifth day and were poised for a weekly decline of 10 percent amid global oversupply and a bleak demand outlook that made it hard to guess when the market would find a floor.
Futures of global benchmark Brent and U.S. West Texas Intermediate (WTI) crude turned direction after trading steady earlier on the strength of stocks on Wall Street. The two crude benchmarks hit 12-year lows earlier in the week after a plunge in China`s stock market roiled global markets.
Since the selloff in oil began 18 months ago, traders and investors have wondered how long and deep the slide would be as prices fell from above $100 a barrel to below $40, looking to break below $30 next.
Goldman Sachs added to the bearish sentiment on Friday by releasing notes from an energy conference in Miami it hosted this week between oil producers and investors that concluded producers weren`t ready to cut enough output at current prices.
"We believe we need to see sustained low oil prices in late 2015/1Q 2016 so producers will move budgets down to reflect $40/bbl oil for 2016," the Wall Street bank said in the note.
"Instead, producers spoke largely of their agility to spend within cash flow and, as described below, ramp up when needed. This hurt sentiment as investors came away concerned that companies were not being responsive enough."
Brent was down 40 cents at $33.35 a barrel by 1:52 p.m. EST (1852 GMT). It hit a session low of $32.78, after sliding on Thursday to $32.16, the lowest since April 2004.
Brent was also on track for a weekly loss of about 10 percent, not far off the 11.2 percent drop in the opening week of 2015, which was a record loss for oil in the first full trading week of any year.
U.S. West Texas Intermediate (WTI) slipped by 33 cents to $33.60 a barrel. It fell to a session low of $32.64, after hitting $32.10 a day ago, the lowest since December 2013.
"It is extremely difficult to forecast the exact bottom," Hans van Cleef, senior energy economist at ABN Amro, told the Reuters Global Oil Forum.
"The sentiment is still extremely negative and short positions are still at excessive levels. So, downside risks still remain. That makes it also hard to pinpoint the timing of the expected recovery."
ABN Amro cut its 2016 Brent and WTI price forecast to $50 per barrel from its prior view of $65 and $60, respectively.
The dollar was up 0.4 percent after the U.S. Labor Department reported a greater-than-expected 292,000 new nonfarm jobs in December. A stronger greenback makes dollar-denominated oil less affordable for holders of the euro and other currencies. U.S. stock indexes seesawed as market tumult in China
"In my view, crude is still just a number on screen with little implications for most of the people and computers that are actively trading," said Scott Shelton, energy broker and commodities specialist at ICAP in Durham, North Carolina. "It will keep going down until the equity world stops selling off."
The options market indicates concerns oil prices can fall further. Some investors are acquiring put options giving them the right to sell at $25 a barrel, anticipating that Brent will fall below that, and the costs of those options are soaring.
Over the past year, the world has been producing 1.5 million barrels a day more oil than it consumes. The Organization of Petroleum Exporting Countries and the International Energy Agency expect global demand growth to slow in 2016 to around 1.20-1.25 million barrels per day from a very high 1.8 million bpd in 2015.