Oil prices edged up on Tuesday after U.S. crude broke below $40 per barrel the previous session, but traders said fuel markets continued to be dogged by excess production.
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Oil prices extended their rebound in Asia on Thursday following a mixed set of United States stockpile data but analysts warn that the gains might not hold.
U.S. West Texas Intermediate (WTI) crude was at $40.16 a barrel at 0148 GMT (9:48 p.m. ET on Monday), up 10 cents from its last close after dipping below $40 for the first time since April the previous session.
October Brent crude LCOV6, -0.05% on London’s ICE Futures exchange rose $1.30, or 3.1%, to $43.10 a barrel.
Standard Chartered bank said there was “no fundamental justification for recent oil price falls” and that “the global oil market has rebalanced, and USA crude supply and inventories are expected to fall”.
Oil hit 2016 highs above $50 a barrel between late May and June as crude supplies tightened from disruptions in Canada, Nigeria and Libyan energy sectors, and a near economic meltdown in OPEC member Venezuela.
For the first time since April the price of crude oil fell below $40 a barrel on Tuesday. Ironically, this could also place downward pressure on oil prices.
“The boat was loaded very heavily to one side in terms of a lot of shorts in the market”, said John Kilduff, partner at Again Capital, a NY hedge fund focused on energy. Following the release of the data, crude oil prices spiked to a session low of $39.19.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, dropped by 1.3 million barrels last week, the API said Tuesday, according to a person familiar with the figures.
Sub-$40 oil could be a psychological hurdle for shale drillers looking to dispatch more rigs back into the oil patches they emptied in the two-year energy bust.
A weekly survey of pump prices by the Kent Group says the average price for a litre of regular unleaded gasoline across Canada was $1.024 as of July 26.
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“Risks for oil remain skewed to the downside in 2H16”, analysts at Morgan Stanley said a report.
