The oil supply glut does not seem to be abating, with oil majors preferring to pump and store oil at the moment instead of cutting production.
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Brent crude was down $1.43, or 3.3 percent, at $42.10 a barrel, after a session low at $41.87. “It is negative because rebalancing takes longer than some market participants thought before”.
The analyst noted that the oil price rose sharply earlier this year, but commented that he doesn’t expect this to last, despite the sharp revision in U.S. interest rate expectations. The dollar (http://www.marketwatch.com/story/dollar-rises-as-yen-backtracks-from-sharp-gains-2016-08-01) turned higher against the yen Monday.
“U.S. oil might still be getting some boost from the weaker dollar this morning, but the uptrend in US drilling activities is bearish for prices”, said Gao Jian, a China energy specialist at SCI International, referring to the addition of three active oil rigs in the USA last week, according to industry group Baker Hughes.
In other words, it very could be the strengthening greenback that is the biggest near-term lid on oil prices.
Oil has slipped about 19 percent from its recent peak in early June, skirting a bear market and ending a recovery that saw prices nearly double from a 12-year low in February.
Despite the slightly higher prices early on Tuesday, analysts said that overproduction in crude as well as the refining sector was still weighing on markets. As per a report that was published in Bloomberg, Saudi Arabia’s crude oil demand expanded by an average 24,000 barrels a day for first five months of this year. Both countries are members of the Organization of Petroleum Exporting Countries (OPEC).
In OPEC-member Libya, the state oil company said on Sunday it welcomed the reopening of blockaded oil ports following a deal between the United Nations -backed government and an armed force, saying it would begin work to restart disrupted exports soon.
“In the last 72 hours, there have been reports of successful negotiations to re-open blockaded oil terminals in Eastern Libya and USA airstrikes against Daesh (ISIS) in Sirte”. Iran’s oil minister concurred the marketplace was oversupplied however said balance in between supply and need will be brought back, Iranian state television reported. September diesel futures dropped 3.8% to $1.2579, the lowest settlement since April 18.
The correlation is far from ideal and should be treated with extreme caution but it is strong enough to be able to state that a fall in prices has usually been associated with a rise in hedge fund short selling, he concluded.
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– Benoit Faucon and Barbara Kollmeyer contributed to this article.
