Oil Price falls 3% as investors grow cautious about rising supply

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Oil prices fell more than 3 percent on Tuesday, reflecting growing concern that a two-month rally could fade as demand fails to keep up with swelling global supply including new output from Kuwait and Saudi Arabia.

Oil prices have risen more than 30 percent since mid-February, ahead of an April 17 meeting in Doha where the Organization of Petroleum Exporting Countries (OPEC) and other major suppliers including Russia will discuss an output freeze aimed at bolstering prices.


But with global inventories swelling and signs some OPEC members are losing market share, the meeting is unlikely to do much to prop up prices, analysts and traders said. Rising demand for gasoline in the US is not seen as keeping pace with the increased worldwide supplies.
Brent crude futures fell by $1.22 to $39.05 a barrel by 12:07 p.m. EST (1607 GMT), having lost 7 percent in the last week, while US crude dropped by $1.26 to $38.13.


Prices sank further after a source familiar with Iranian thinking said Tehran would attend the meeting in Doha, but not necessarily take part in negotiations over production freezes.
Market watchers now believe that the rebound in US crude prices from 12-year lows touched in February was more the consequence of a major short covering rally and less to do with improving fundamentals.
Big hedge funds have been closing out their bearish bets on US oil prices at the fastest pace on record, most recent data showed on Friday, with little indication that funds are prepared to bet on a quick rebound. Gross long positions have barely risen since January.
Data on Monday from the InterContinental Exchange showed speculators hold the largest net long position in Brent futures on record.


?Long positioning in Brent is at record highs and vulnerable for a bearish repositioning? said SEB commodities analyst Bjarne Schieldrop said.
US commercial crude stock piles were expected to have reached record highs for a seventh straight week, while refined product inventories likely fell, a Reuters survey showed late on Monday.