Oil erases gains, drops -1% on persisting oversupply worries

Oil benchmarks on both sides of the Atlantic failed to sustain in the positive territory and reverted to the red zone in the European session, as oversupply worries overshadowed any recovery in oil.

WTI testing $ 41 mark

Currently, both crude benchmarks now drop almost 1%, with Brent testing $ 43 support, while WTI flirts with 41 barrier. Oil prices resumed the ongoing bearish momentum at the start of a new month, as omnipresent supply glut worries continue to haunt the oil markets.

Earlier on the day, the black gold staged a tepid-bounce as markets adjusted their positions stepping into a new month. While better-than expected Chinese manufacturing data also offered some respite to the bulls. However, the recovery was short-lived as slowing demand and oversupply worries continue to paint a bleak outlook for oil.

Analysts at Barclays noted, “Demand growth remains lackluster and has not made significant inroads to clear the inventory overhang for oil. With the macroeconomic picture worsening and Saudi Arabia unlikely to exhibit much restraint..., refineries are going to find themselves in the line of fire."

Going forward, a set of fresh stockpile reports will be eyed closely later this week, with the API set to publish its data on Tuesday, followed by the official government crude reserves report published by the EIA on Wednesday.