Depressed energy prices have sharply curtailed oil and gas exploration. The fuel surplus means American refiners may process less oil even as crude supplies remain more than 100 million barrels above the five-year average for this time of the year.
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U.S. West Texas Intermediate (WTI) futures were down 18 cents at US$45.50 a barrel.
USA gasoline inventories rose to 240.1 million barrels, while analysts surveyed by Bloomberg had forecast a 1 million barrel drop.
Even as travel throughout the US remains high during the key summer driving season, demand in gasoline has not been strong enough to offset vast supply builds.
A day earlier, New York-traded oil gained $0.77, or 1.72%, bouncing off near two-month lows amid heavy short covering on Thursday, even as investors expressed significant concerns on a global oil and gasoline supply glut in the wake of a bearish US stockpile report from the previous session.
“Unplanned supply-side factors brought the market near balance in the second quarter, and it is again supply-side factors that will hinder that balance in the near term”, said Mr Harry Tchilinguirian, head of commodities research at BNP Paribas SA in London.
A glaring example of waning demand is China, where crude imports slipped 5% on-month in June to 30.62 million tons, or 7.5 million barrels a day.
The Organization of the Petroleum Exporting Countries (OPEC) – a 13-member cartel led by Saudi Arabia – increased output to record levels in June. “We are looking to return to US$40 or below” for the USA benchmark, West Texas Intermediate (WTI). The grade rose 93 cents to settle at US$45.68 on Thursday. Still, she said a drop to as low as $40 a barrel is unlikely unless there’s significant selling by speculative investors.
Oil was also helped higher on Thursday as the dollar weakened on the pound’s rally after the Bank of England’s surprise decision not to cut rates.
It said that consumers have moved away from energy-efficient vehicles that they favored when oil prices were higher.
Also last week, the continuing concerns over a slowdown in China and the U.K.’s vote to exit the European Union, also known as Brexit, weighed on expectations for energy demand.
The “main narrative” of a globally balanced market remains intact, said Societe Generale’s Wittner. WTI crude fell to US$26.05 a barrel in February, the lowest level since May 2003.
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“I’m not uber-bearish”, Wittner said.
