Crude oil futures dropped around 2 per cent on Wednesday, heading back towards $30 a barrel as profit-taking wiped out a chunk of the gains notched up in the previous session on hopes for output cuts.
Prices were also dampened by a bigger-than-expected build in US crude inventory and worries about the economy in China, the world's second-largest oil consumer.
Brent crude had declined 51 cents to $31.29 a barrel by 0308 GMT (7.08am UAE time), after hitting a session-low of $31.20 a barrel. It settled up $1.30 at $31.80 on Tuesday.
US crude fell 72 cents to $30.73 a barrel, recovering slightly from a session-low of $30.30 a barrel. It ended Tuesday $1.11 higher at $31.45 a barrel.
“The positive sentiment stemmed from strong US corporate earnings and talk of Opec and Russia considering production cuts. We consider the likelihood of any agreement between these parties as extremely low,” ANZ said in a note on Wednesday.
“However, rising US crude stockpiles are likely to remain a headwind in the near term. At the current pace, the US crude stockpiles will cross the all-time high of April last year in the next month.”
Daniel Ang at Phillip Futures said: “With the US ability to produce oil in much higher quantities, it will be difficult to support prices with supply cuts. Therefore, it is probably the case that even if major producers want higher prices, they may not be able to achieve this without everyone's blessing.”
"Inventory figures, if continuing to grow, would remind the market of the current oversupply. This would possibly be a bad sign for oil prices."
US crude stocks rose by 11.4 million barrels in the week to January 22 to 496.6 million, compared with analyst expectations for an increase of 3.3 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 664,000 barrels, data from industry group the American Petroleum Institute showed on Tuesday.
US and Brent crude prices rallied on Tuesday after the oil minister of Iraq said that Opec’s Saudi Arabia and top non-Opec producer Russia were showing signs of flexibility about agreeing to tackle an oil glut that has pushed prices to 12-year lows.
Meanwhile, Venezuela's oil minister will tour Opec and non-Opec countries in a bid to drum up support for joint action to stem the tumble in crude prices, President Nicolas Maduro announced on Tuesday night.
Asian stocks were subdued on Wednesday as a wait-and-see mood prevailed ahead of a Federal Reserve policy statement due later in the day.
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