Oil prices drop further over uncertain global outlook

Crude oil prices fell, 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 stabilized 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 U.S. 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.

November Brent crude futures were down 72 cents, or 1.5 percent, on the day at $48.20 a barrel by 0345 EDT, having risen as much as 3 percent on Monday.

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

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.

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

The discount of U.S. 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.