Singapore/London: Oil prices fell on Tuesday, extending losses into a third week, on worries over a supply glut and with U.S. inventory data expected to show another increase in crude stocks. Brent crude for December delivery decreased 45 cents to close at $47.54 a barrel on the London ICE Futures Exchange.
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A build in the inventories is typically interpreted as a sign of softer demand in the world’s top oil consuming nation and a dampener on prices.
Oil prices have dropped for two straight weeks, with Brent now firmly below the psychologically key $US50 a barrel level.
“The refinery data might be a sign that the maintenance season is winding down”, said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors in Leawood, Kansas, who helps manage $US13.2 billion. Refiners used crude as input for diesel, gasoline, jet fuel etc. The consistent lower prices meant lower cost of input, and hence higher margins.
The USA plans to sell millions of barrels of crude oil from its Strategic Petroleum Reserve from 2018 until 2025 under a budget deal reached on Monday night by the White House and top lawmakers from both parties.
As a result, Goldman said it did not expect oil markets to re-balance next year, a term used to describe a market in which supplies and demand are at similar levels.
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The US Department of Energy’s Energy Information Administration will release its official crude oil and oil product data later on Wednesday. Remember, China is the second largest consumer of crude oil, and if they are not using it as much, it certainly has a negative effect on the market. If the drop in oil investment continues for one more year, then it’ll be first time in the last two decades that oil investment eased for the consecutive two years. The cumulative U.S. oil production has declined to 9.1 million barrels per day (mmbpd), from the record high of 9.6 mmbpd. “The consultancy estimates U.S. output could decline even faster than its previous expectations of 8.8 million barrels a day by year-end”.
