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Published: Sun, July 10, 2016
Economy | By Melissa Porter

Oil tumbles 5 percent after United States crude draw disappoints market bulls

Oil tumbles 5 percent after United States crude draw disappoints market bulls

Analysts at Morgan Stanley said there were also signs prices could fall again soon, pointing at stalling gasoline demand and more oil from Canada and Nigeria after production problems. A Reuters poll estimated a drop in crude inventories of 2.3 million barrels for the week ended July 1. American shale drillers have brought back the most oil rigs of any week this year amid expectations of a stabilizing market. The report is delayed one day because of a holiday Monday in the U.S.

A survey conducted by Reuters last week found that a partial recovery in Nigeria contributed to an increase in OPEC output last month.

USA oil for August delivery recently rose 74 cents, or 1.6%, to $48.17 a barrel on the New York Mercantile Exchange.

Futures dropped as much as 1.5% in NY before inching higher.

He noted that the recent rebound in oil prices to levels above $50 per barrel has encouraged some producers to ramp up production, which could see concerns about overproduction return. "You have the dollar strengthening, risk aversion rising because of the ongoing Brexit saga and then there are the actual supply and demand aspects to consider", Fawad Razaqzada, market analyst for forex.com, said in a note.

EY Services oil and gas analyst Sanjeev Gupta said dealers were also keeping an eye on the release Friday of USA economic data, including on employment in the world s top oil consuming nation.

The American Petroleum Institute estimated that in the second quarter, the number of completed USA oil wells - those that drillers had finished making and were ready to produce oil or gas - plunged by 69 per cent in the second quarter compared with a year earlier. Libya boosted output in June by 40,000 barrels a day to 320,000.

The gain in stockpiles has been most pronounced along the U.S. East Coast, where stocks were 13 million barrels (21 percent) higher than prior-year levels and still increasing as recently as June 24 (tmsnrt.rs/29hzdg6).

The EIA data also showed gasoline inventories fell by about 100,000 barrels and distillate fuel stocks decreased by 1.6 million barrels. Imports to the region jumped to a six-year seasonal high.

Despite record demand from drivers across the United States, an excess of gasoline worldwide has weighed on refineries' profitiability, leading some to cut runs and throwing the demand for crude oil in doubt.

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