Adding to the bearish pressure overnight was news that Saudi Aramco, Saudi Arabia’s dominant state-run oil group, had cut the price of crude sold to Asia.
Advertisement
Oil has tumbled more than 20 percent from its June peak, meeting the common definition of a bear market and ending a recovery that saw prices nearly double from a 12-year low in February.
USA crude closed below US$40 a barrel Tuesday, erasing early gains as persistent worries of a glut offset the boost from a weak dollar early in the session.
The most recent inventory figures from the U.S. Energy Information Administration (EIA) showed that the U.S. added 1.7 million barrels of crude in the week ending July 22 – pushing the commercial crude oil inventory figure to “historically high levels” for this time of year. Last week’s EIA report showed USA crude stockpiles fell by 1.9 million barrels in the week ended July 29.
Futures gained 0.8 per cent after dropping below US$40 on Monday for the first time since April.
Meanwhile, WTI crude oil futures were down 3.7% to $40.07 per barrel and Brent crude was 3.33% lower to $42.08 per barrel.
The Iraqi oil ministry said on July 11 the leak was repaired.
The dollar’s drop to a three-week low also made greenback-denominated oil more affordable to holders of the euro and other currencies.
Also around the noted $40 level is the key 200-day moving average, which crude oil has not traded below since April.
Refineries from Singapore to China and South Korea are cutting operating rates amid a slump in margins and rising supply from state-owned giants such as China Petroleum and Chemical. Oil prices have fallen dramatically over the last two years from their highs in mid-2014, when a barrel of oil was trading at US$100. “I see a strong build in shorts”.
The Canadian government bonds plunged after global crude oil prices rebounded on Tuesday after falling by 10 percent in one week. The price of Brent crude started the week at $45.69 and then declined throughout the week to close the week at $42.46.
Advertisement
“The world is so oversupplied and the pace of rebalance is so slow that even geopolitical factors such as the ongoing civil strife in Nigeria are not enough to offset the fall in prices”, said Gao Jian, an energy analyst at SCI International as cited by the Wall Street Journal.
