The number of financial traders betting speculatively on oil has reduced, causing oil prices to tumble as positions are sold off. The reduction was likely triggered by Britain’s decision to leave the European Union, which has cast a cloud of uncertainty over financial markets and discouraged speculators from investing their money in riskier assets such as oil.
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“Spreads in the USA and Europe moved deeper into contango this week as the return of Canadian barrels (expected) and the speedy return of Nigerian production (not expected) erased the briefly lived, but abnormally high level of unexpected outages and returned the spread narrative back towards a generously oversupplied physical market”, according to OilPrice.com.
Futures for crude oil CLQ6, +0.37% gained 21 cents, or 0.5%, to $49.21 a barrel, while Brent LCOU6, +0.48% advanced 24 cents, or 0.5%, to $50.59 a barrel.
Of the U.S. reserves, more than 50 per cent are estimated to be in the form of unconventional shale oil, with Texas alone believed to hold some 80bn barrels.
Bloomberg News reported Tuesday that Africa’s biggest oil producer pumped an average 1.53 million barrels a day last month, up around 90,000 a day from May.
United States crude fell $2.55, or 5.2 percent, to $46.44.
Production slipped by 55,000 barrels a day to 8.62 million last week, the lowest since September 2014, the EIA said.
Militants have resurfaced this month, with the Niger Delta Avengers group claiming attacks on five crude-pumping facilities overnight Sunday.
Gammel believes that the the long-term fundamentals of the oil market remain favorable, and expects to see a continued price recovery with global inventories starting to decrease in the third quarter.
“The market was very much oversold several months ago”, said Richard Gechter, a director at Twin Eagle, a wholesale energy and midstream services provider.
Already, there are believed to be between 1,300 and 2,750 drilled uncompleted (DUC) shale wells in the US, many of which can be completed to begin production in less than a month, the report said.
August gasoline futures dropped 6.1 percent to $1.422 a gallon.
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Three attacks hit Saudi Arabia on Monday: one near a Shiite mosque in the eastern city of Qatif, another near the US consulate in Jeddah and a third outside the courtyard of the Prophet’s Mosque in Medina. Analysts at Morgan Stanley have already warned that prices could fall further as demand remains the same even as more nations ramp up production.
