Oil prices dented by uncertain global outlook

London - Crude oil prices fell on Tuesday, reversing a steep rally the previous day, under pressure from uncertainty over whether global demand will be enough to erode a sky-high surplus.

Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilised after losing more than half its value in a year, and the persistence of the highest global surplus in modern times.

There is evidence that US shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency (IEA) to issue more bullish forecasts for the market balance next year.

Capital Economics analyst Thomas Pew said there has been a loss of some half a million barrels of oil per day in US production in the last couple of months alone.

But uncertainty is running high over the outlook for demand in top consumers such as China, as well as the resilience of the US economy following the Federal Reserve's policy meeting last week.

"Certainly, nothing is certain. That’s the only certain thing that there is. That being said, it does look like lower prices have finally started to take their toll on US production," Pew said.

"All eyes are going to be on whether that continues," he said, adding that Capital Economics' forecast was for a gradual rise in oil prices over the coming years.

November Brent crude futures were down1.5%, on the day at $48.20 a barrel by 08:45 GMT, having risen as much as 3% on Monday.

Brent futures are set for a fall of more than 11% this month, bringing the year-to-date decline to 16%.

The physical markets have also turned gloomier this week.

A dearth of fresh tanker fixtures to ship North Sea crude to key customers in Asia knocked the premium of physical barrels of oil off a six-week peak on Monday.

US West Texas Intermediate (WTI) crude futures for November were down $1.03 at $45.92 a barrel.

The discount of US crude prices to Brent has tightened to around $2.25 a barrel, from around $8 six months ago and is around its lowest this year.