Oversupply concerns continue to weigh on the oil price, though today’s losses are relatively minor, after the weekly US crude inventories report today.
The Energy Information Administration (EIA) revealed that domestic crude supplies rose again, by 1.1mln barrels, dashing hopes that the figures would show the first decline in stockpiles in two weeks.
In truth, those hopes had dissipated after the American Petroleum Institute (API) reported yesterday a 2.1mln barrels week-on-week increase in its measure of US crude stockpiles.
Forecasts prior to the API release has been for a 1.3mln barrels decrease.
In London, Brent crude was off 60 cents, or 1.33%, at US$44.94 a barrel in afternoon trading, while stateside West Texas Intermediate was 67 cents cheaper (1.6%) at US42.09 a barrel.
Sentiment was not helped by Saudi Arabia reporting it pumped a record 10.67bn barrels of oil a day in July in response to a summer surge in domestic demand.
The main consolation for those wishing for an upturn in the oil sector was that inventories of gasoline and distillates fell back, with gasoline supplies down 2.8mln barrels and distillate reserves 2mln barrels lower.
“While US oil production may well increase again later this year, the recent renewed weakness in oil prices means this outcome is now probably priced in, but if oil prices were to remain around their current levels, I would be very surprised to see a marked increase in production,” said Fawad Razaqzada of spread betting outfit City Index.
“In any case, many oil forecasters, including the EIA, expect the crude market to be under-supplied in the second half of next year. This argues against another significant drop in the price of oil. If anything, prices ‘should’ actually rise in the event of undersupply. What’s more, the surging US equity prices to record high levels point to improving economic conditions (the markets tend to lead the economy), which in turn implies even stronger demand for oil next year,” the analyst concluded.