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. US crude fell for the third session in a row to trade at the lowest in more than two months, as a relentless climb in oil stockpiles helped trigger a 10 percent drop in prices since the beginning of November.
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US crude finished down $1.01 at $40.74, losing $3.65 on the week.
NEW YORK, United States-Oil prices tanked Wednesday after a private report showed an unexpectedly big jump in USA stockpiles, adding to concerns about the persistent global oversupply.
Brent was off 36 cents, or almost 1 percent, at $43.68 a barrel, its downside limited by the impending expiry of its front month December contract at Friday’s settlement.
The world has a 1.6 million barrel per day oil production surplus (supply minus demand) as the oil glut enters its 8th consecutive quarter (Figure 1).
A record glut of oil is placed to carry on into next year and keep pressure on costs, the worldwide Energy Agency said on Friday.
West Texas Intermediate, the US benchmark price for crude oil, lost 0.6 percent to $41.50 per barrel.
Europe will be the battleground between producers of sour crude grades, including Russian Federation, Iraq, Saudi Arabia and Iran, as the Asian market becomes more “crowded”, the Paris-based IEA said in its monthly report.
He said Canada needs to compete with USA tight oil producers who have ramped up oil production from shale formations in recent years.
The oil price war is intensifying as OPEC relentlessly pumps crude, flooding the US with imported oil and undercutting shale companies as low prices gut the industry.
“With U.S. commercial crude cover likely to see new 80-year highs by month’s end amidst a few indications that the rate of production decline is slowing, our long held view that WTI will be re-visiting the late August lows of US$37.75 has been reinforced”, wrote Jim Ritterbusch of Chicago oil consultancy Ritterbusch & Associates.
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USA crude oil production is projected to increase to 9.3 MMBPD in 2015, up from an average 8.7 MMBPD in 2014, then drop to 8.8 MMBPD in 2016.
