Crude dipped below $40 a barrel on Monday after U.S. data pointed to an unexpected increase in commercial oil and gasoline supplies, adding to concerns about a lasting supply glut.
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Crude oil futures settled below US$40 a barrel on August 2 for the first time since April.
Crude oil futures traded at a new four-month low below $40 USA a barrel Tuesday amid continuing oversupply worries.
But prices got a reprieve Wednesday after industry group American Petroleum Institute reported that U.S. crude inventories and gasoline stockpiles have fallen, signs that the excess stock could be easing.
“The inability to close below $40 yesterday has given people a little confidence”, said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
“The sentiment is still quite negative and depressed on oil prices”, said Eugen Weinberg, analyst at Commerzbank.
Oil companies have postponed or cancelled oil exploration and development projects due to low crude prices, in turn affecting the offshore drilling industry.
The commodity-sensitive loonie also felt the impact, dipping 0.27 of a USA cent to 76.32 cents US.
Brent for October settlement was 40 cents higher at $42.20 a barrel on the London-based ICE Futures Europe exchange. “We’re in a vicious cycle, with no sign of this glut in oil products disappearing anytime soon, while any cutback by refiners is backing up crude into the system”.
The E.I.A. added that the oil stock in the inventory rose by 61 million barrels from the previous year’s total taking it to 521.1 million.
“Oil prices rallied after the EIA weekly report showed gasoline inventories declined the most at this time of the year for at least five years”, ANZ bank said.
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Prices dropped below $ 40 a barrel on Monday, the first time since April. None-the-less, the market will face downside pressure into the end of the year unless increased demand can put a dent in the oversupply. However the country’s crude supply managed to increase 1.4 million barrels last week, as compared to the markets’ expected drop of 1.4 million barrels.
