Supply glut pushes oil lower

By Simon Falush

LONDON (Reuters) - Oil fell on Tuesday weighed by a glut in supply and worries about a fragile demand outlook.

Brent crude futures were down 21 cents to $48.58 by 0913 GMT, under pressure from Russian production hitting a post-Soviet peak while China's demand outlook weakened.

U.S. crude futures were trading at $46.12 per barrel, down 2 cents from their last settlement after falling in the previous session due to a rise in stockpiles.

"It's all about supply," said Michael Hewson, analyst at CMC Markets. "Oil's going to remain under pressure with inventories likely to expand and the potential for Iranian supply to come on stream in the next few months."

Also adding to the supply glut, Gulf oil producers are delaying some field maintenance until next year to keep production high and reduce costs as they forecast ongoing low oil prices in 2016.

An expected dip in U.S. oil production as a result of low prices is unlikely to significantly dent a glut, which is seen remaining at 1-2 million barrels per day on average for 2015.

"Our framework suggests that (U.S.) production would drop by 35,000 barrels per day in 2016 at the current rig count under our well deferral scenario, more than the 20,000 barrels per day year-on-year decline estimated a week ago," Goldman Sachs said in a note.

However it added that even in the United States there are indications that production could rise.

"A rapid draw-down of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016," it said.

U.S. crude oil stockpiles likely rose by 2.7 million barrels last week, growing for a sixth consecutive week as supply outstrips demand, a Reuters poll showed. Industry group the American Petroleum Institute (API) will issue its preliminary inventory data on Tuesday before official numbers on Wednesday from the U.S. government.

Traders are also keeping an eye on U.S. monetary policy as a rise in U.S. interest rates would likely push up the dollar against other currencies, making oil more expensive to buyers using other currencies.

"With the focus on U.S. economic data this week, anything supportive of the Fed raising rates could see commodity markets come under some pressure," ANZ said.

(Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely)