Prices had already hit three-month lows last week after USA data showed an unexpected increase in commercial stockpiles of oil and gasoline, adding to worries about a global crude supply glut.
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Recent research by Rystand Energy has revised U.S. crude reserve upwards to 264 billion barrels, more than Saudi Arabia and Russian Federation. Despite the slightly higher prices on Tuesday, oil market data implies bearish market conditions.
Oil prices rose Wednesday with expectations for supply declines, a long-term rebound and some profit-taking by traders all leading to gains.
The U.S. private sector added 179,000 jobs in July, beating estimates of 170,000, the ADP national employment report showed.
A report from the Institute of Supply Management is likely to show that its non-manufacturing index slipped to 56.0 in July from 56.5 in June.
The EIA said the 521.1 million barrels in the USA stockpile is more than 61 million barrels higher than it was a year ago and more than 150 million barrels above the supply figure two years ago.
On a brighter note, however, the EIA said gasoline stockpiles fell by 3.3 million barrels last week, but distillate inventories went up by 1.2 million barrels.
Bloomberg also surveyed 20 analysts for their thoughts on where oil prices would be next year. The U.S. Energy Information Administration is expected to announce at 10:30 a.m. EDT (1430 GMT) a drawdown of 1.4 million barrels in crude inventories for the week ended July 29.
Nigeria has suffered steep crude output losses this year as militant attacks targeted oil infrastructure.
News that the U.S. economy grew slower than expected in April-June also raised questions about demand in the world’s biggest oil consumer. “Supply disruptions and risk appetite were supportive April-June, but fundamental headwinds are growing, which outnumber any recent positives”.
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Crude prices continued to fall Tuesday as worries over a supply glut pushed oil below US$40 a barrel for the first time in more than three months. Right before the API data was released, oil was sitting at US$39.60, but the immediate reaction to the data was for WTI to lose some ground and then recover to around US$39.80. Analysts in a Reuters poll expected declines in both crude and refined product stocks.
