Oil prices continued to fall on Wednesday (Aug 10), driven in part by elevated United States crude inventories and Saudi Arabia’s record oil production.
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Prices continued to fall in July because of concerns about high levels of U.S. and global petroleum product inventories, despite relatively strong demand and because of growing USA oil rig counts, according to EIA. This would be the highest annual average gasoline consumption on record.
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The market also lost the previous day’s upward momentum as speculation fizzled that the Organization of the Petroleum Exporting Countries and other oil producers would embark on another round of talks on price co-operation after their failed effort in April.
Total motor gasoline inventories dropped last week by 2.8 million barrels.
NYMEX crude for September delivery was down 28 cents at $42.74 a barrel, after closing up $1.22, or 2.9 percent, on Monday.
U.S. oil prices will rise to an average of $45 a barrel by the end of the year, up nearly 13% from August, as oversupply eases, though uncertainty about prices exists, the Energy Information Administration said in a report on Tuesday. EIA projects natural gas inventories will reach 4.042 Tcf at the end of October 2016, an increase of 20 billion cubic feet from the prior month’s projection and the highest end-of-October level on record.
Today’s inventory report from the EIA, due at 1430 GMT will as usual be watched closely, not least considering the exit of the driving season and the impact this will have on inventory developments.
The recent increase in global output has upended many analysts’ earlier prediction that the oil market is tightening.
Brent futures fell 0.1 percent to $44.95 per barrel, after losing 0.9 percent on Tuesday. Crude oil inventories in Petroleum Administration for Defense District (PADD) 3 plus Cushing, Oklahoma, declined 3.9 million barrels from June to July, significantly less than the five-year average decline of 7.7 million barrels, likely providing more downward pressure to the front of the WTI futures curve.
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The overhang of supply of both oil and products is yet to show signs of being reduced and the current expectations of higher prices have once again being delayed. The World Bank slashed its 2016 global growth forecast to 2.4% from 2.9% estimated in January because of low commodity prices, sluggish demand, weak trade and diminishing capital flows. At 235.4 million barrels, gasoline stocks are 9.2 percent above levels during the same period in 2015.
