Americas News
Oversupply Worries Once Again Pull Down Oil Prices
The worry over the global supply glut that negatively impacted oil prices earlier this week intensified on Thursday as Brent crude closed 97 cents, or 2.1 percent, lower at $46.20 a barrel, and U.S. West Texas Intermediate (WTI) crude settled down $1, or 2.2 percent, at $44.75.
This time the declines were attributed to an increasing focus on U.S. government data that shows inventories of gasoline and other oil products to be increasing despite July being the height of the U.S. motoring season; gasoline stockpiles grew by 911,000 barrels last week, according to the data.
Also, despite robust vehicle sales in China, that nation's gasoline production is set to outpace demand in 2016, say experts.
This prompted Hans van Cleef, senior energy economist for ABN AMRO, to state that Brent could slip as low as $42: "Near-term, there are still some downside risks."
However, some traders are encouraged by good news amongst the data released by the U.S. Energy Information Agency on Wednesday, namely that the country's crude stockpiles shrank by 2.3 million barrels in the week ended July 15: the ninth straight week of reduction.
Tudor, Pickering, Holt & Co. analysts said in a note, "Compared to prior week and/or norms, this was a bullish report."
But the overall sentiment on trading floors is one of trepidation, as summarized by Pete Donovan, a broker at Liquidity Energy in New York, who told media, "The market is technically weak, inventories are still high for summer, maintenance season is not far off, and we have floating barrels at sea to top it all."
So far, Barclays has proven to be the strongest voice of market optimism this week: it calculates that as supply shortages develop, oil prices will peak at an average $85 per barrel by 2019, compared to its earlier prediction that the peak would be $83 and arrive in 2020.
