The storage spike has sharply widened prompt crude’s discount to oil slated for later delivery as traders hold more in hopes of selling at higher prices later.
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“It now seems only a question of time before it drops below the $40 per barrel mark”, analysts at Commerzbank AG in Frankfurt including Carsten Fritsch said in a report.
Meanwhile, the United States Brent Oil Fund, LP (NYSEARCA:BNO) was down 2.83% at $15.10.
MSCI’s all-country world index was up 0.2 per cent, while European shares closed up 0.7 per cent after well-received earnings reports from companies including Henkel. “Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats”, he said. However, on this occasion, the scenario seems to be quite different. That would be the largest U.S. monthly import of Iraqi oil since mid-2012.
Oil prices have lost about 50 percent in the past year as several OPEC members pumped near record levels.
Bloomberg reports that oversupply worldwide, created by OPEC’s refusal to cut production, has devastated the shale industry’s ability to produce oil at a competitive price, leading to rig closures throughout the sector.
US refineries continued to step up their processing, as several bring facilities back online from fall maintenance. Manufacturing activity in China and Europe has remained slow.
It maintained its forecast for world oil demand growth in 2015, predicting it will rise by 1.5 million barrels per day (mb/d) to average 92.86 mb/d – a more conservative estimate than the IEA’s forecast of 1.8 mb/d in 2015.
India will be the chief driver of rising demand, where the IEA expects consumption to increase more than anywhere else, hitting 10 million bpd by 2040. In addition, the upcoming winter season means that more fuel would be demanded for heating purposes.
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Global oil demand growth has not been fast enough to soak up the excess in supplies and analysts say a rebalancing of the supply-demand situation is needed for a sustained uptick in prices. The supply is expected to further contract by 0.13 mb/d.
