Oil prices fell for a second session in Asian trade on Tuesday as concerns about top energy consumer China and rising oil supply lay heavy on markets, even though possible talks between OPEC and Russia on output cuts offered some support.

Brent for April delivery had dropped 66 cents to $33.58 a barrel as of 0502 GMT, after settling down $1.75, or 4.9 percent, in the previous session.

The front month contract for West Texas Intermediate (WTI) was down 71 cents at $30.91 after falling $2.00, or 5.9 percent, the session before.

Even with the declines, U.S. crude is still approximately 19 percent above the more than 12-year low of $26.19 hit in mid-January.

The fall in oil prices echoed the general negative sentiment in the Asia time zone, said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

“Stocks markets are down; oil is weakening. It all points towards negative risk sentiment across the board,” he said.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down almost 0.9 percent, while Japan’s Nikkei slipped 0.6 percent.

Furthermore, the dollar index slipped.

“(Prices) have just come back to reality a bit, although they are holding water above $30 a barrel,” said Ben Le Brun, market analyst at Sydney’s OptionsXpress, indicating the concern over rising oil supplies and weaker economic data.

Oil prices could fall below $30 a barrel again if investors saw hopes failing of a deal between members of oil producers cartel OPEC and Russia on production cuts, he said.

The Russian Energy Ministry said on Monday that Russia’s energy minister and Venezuela’s oil minister conferred about the possibility of holding joint consultations between OPEC and non-OPEC countries in the near future.

However, Goldman Sachs said it was “highly unlikely” OPEC producers would co-operate with Russia to cut output, while also being self-defeating as stronger prices would bring previously shelved production back to the market.
Crude prices fell after China’s purchasing managers’ index dropped to a three-year low in January, together with ascending oil supplies, ANZ said in a note on Tuesday.

“Rising supply also suggests further downside risk to short-term prices. Output from OPEC rose to 33.1 million barrels per day last month as Indonesia’s membership to the group was reactivated,” the note added.

Le Brun further noted that investors are waiting on a slide of economic data, including figures on U.S. non-farm payroll and unemployment and producer prices from the euro zone, to direct oil markets.

A preliminary Reuters survey on Monday revealed that the aforementioned came as U.S. commercial crude oil inventories likely rose by 4.7 million barrels last week to a new record high of 499.6 million barrels.

The Reuters poll was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API), due out later on Tuesday, and the U.S. Department of Energy’s Energy Information Administration (EIA), due for release on Wednesday.