Despite a strong recovery through February, U.S. oil prices have fallen to a six-year low on fresh oversupply concerns within the market. According to The Australian, West Texas Intermediate (WTI) and Brent crude both fell roughly 2% to US$43.88 a barrel and US$53.44 a barrel, respectively.
One of the primary catalysts behind the resource's fall was the monthly oil market report by the Organisation of Petroleum Exporting Countries (OPEC), which is a cartel-like organisation controlling oil output. The report questioned the recent rally experienced by oil, stating that prices had risen despite an oversupply of nearly one million barrels per day. This data is supported by recent figures from the International Energy Agency (IEA), which showed US inventory levels were sitting near an 80-year high.
OPEC's report also suggested that it was reluctant to intervene by reducing its production ceiling in order to support oil prices. As it stands, OPEC believes that US oil production could take a hit due to low prices by the end of the year, suggesting it won't act to support prices when it next meets in June.
Surprisingly, Australia's energy producers are all bouncing today, despite the bearish outlook for oil prices. Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) are up 1.8% and 3.8% respectively, while Origin Energy Ltd (ASX: ORG) and Senex Energy Ltd (ASX: SXY) are up 2.6% and 2.3%. Despite their heavy falls over the last nine months or so, investors would be wise to steer clear of Australia's energy sector for now. Oil prices are tipped to fall considerably further before they begin to recover, which suggests plenty more volatility for the sector before conditions improve.
