Published: Thu, July 14, 2016
Economy | By Melissa Porter

Oil prices dip in Asia as US rig count jumps

WTI fell July 7 after the EIA said USA crude supplies shrank by a smaller-than-projected 2.22 MMbbl to 524.4 MMbbl. At 5:55 AM EST on July 13, the West Texas Intermediate crude futures contract for August delivery was trading at $46.22 per barrel-a drop of ~1.2%. Both settlements are the lowest since May 10.

The price of oil has dipped lately on fears of a global slowdown in demand and an uptick in supply from the likes of Iran and Saudi Arabia. This is the highest level for the recent 8 years, and that was the key bearish factor for the petroleum market last week. A number of outages in supply, including militant attacks in Niger Delta and wildfires in Canada, provided some relief, but the UK's Brexit vote took the financial market with storm, negatively impacting the sentiments.

WTI and Brent crude prices slumped more than 7% last week on growing fears of over production. "Signs of an end to several supply disruptions and a stronger US -dollar also played their part in keeping sentiment bearish", ANZ bank said on Tuesday. The country pumped 148,000 barrels a day past year, according to BP Plc. That, coupled with steadily increasing output from Saudi Arabia and Iran, sent OPEC production surging by 300,000 barrels a day to almost an eight-year high of 32.7 million barrels a day, Platts said.

Futures dropped as much as 1.4 percent in NY after rising 4.6 percent on Tuesday.

"(Stocks) are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices", the Paris-based IEA said in its latest report.

The price of Brent crude oil lost 2.1% in the same period and fell to $48.2 per barrel.

The U.S. oil-rig count is typically viewed as a proxy for activity in the sector.

After moving lower during Asian trading, crude oil prices recovered by the time the market opened in NY.

"Any suspicion that US producers are increasing their output will spook investors because the outlook for global demand growth is still not very clear", said Gao Jian, an energy analyst at SCI International. The Energy Information Administration boosted its US crude production outlook for 2016 and 2017 in a monthly report. A strong greenback makes dollar-priced commodities like oil more expensive for those using other currencies. The connection has "been extreme here for the past month", he said.

Traders said, however, that the outlook would likely be choppy as the threat of supply reductions could tighten markets. Gasoline futures dropped 5.4 percent. Diesel futures settled up 0.4 cent, or 0.3%, at $1.4163 a gallon.

Like this: