Oil prices have edged up after United States 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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International Brent crude futures were trading at $41.85 per barrel, up a mere 5 cents from their last close, and failing to retake and maintain $42.
Oil went below the psychologically important $40 a barrel mark again this morning – maintaining the dip it suffered on Monday.
USA crude inventories rose for a second week in a row, gaining 1.4 million barrels last week, compared with analysts’ expectations for a decrease of 1.4 million barrels, Energy Information Administration (EIA) data showed.
Oil fell during afternoon trade in Asia Wednesday, with U.S. crude hovering near three-month lows as traders awaited data that will give hints of demand in the world’s top consumer.
Today, some of those fears were alleviated when data showed that gasoline stocks dropped by 3.3 million barrels, more than 10 times expectations of a 200,000-barrel drop. “With spot prices getting under US$40 yesterday, we are not surprised to see spot prices rebounding on the gasoline draw”.
“The bottom line is the Street in the second quarter got a little ahead of itself in calling for rebalancing of supply-demand after Canadian and Nigerian supply disruptions”.
Oil rallied from a 12-year low near $27 in January to a 2016 high of nearly $53 in June, supported by an initiative from OPEC and outside producers including Russian Federation to freeze output and by hopes that the supply glut would ease. Standard Chartered bank said there was “no fundamental justification for recent oil-price falls” and “the global oil market has rebalanced, and USA crude supply and inventories are expected to fall”.
“The 3.3 million-barrel draw to gasoline stocks is likely a welcome surprise for refiners”, said Troy Vincent, analyst at New York-based oil cargo tracker ClipperData. Trade group American Petroleum Institute (API) issued preliminary data on Tuesday for a 1.34 million-barrel decline.
A supply glut that has weighed on prices could increase if oil exports restart from ports in Libya that have been closed since 2014.
Goldman Sachs held its 2017 forecast of $52.50 and near-term range of $45-$50 for WTI.
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“It will take a strong reversal in positioning to create substantial new upside”, Goldman said.
