After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories fell by 2.4 million barrels in the week ended July 31, compared to expectations for a decline of 1.6 million.
Oilfield services firm Baker Hughes’ report that the U.S. oil rig count rose by six this week added to the bearish sentiment for crude as it signaled production could creep up from higher drilling activity. He produces articles and videos on the how-tos of technical trading.
Just a few days back, the Brent oil has slipped below the mark of $50 a barrel but inched up above the mark on Wednesday.
“Prices are likely to consolidate or weaken further”, said Frankfurt-based Commerzbank analyst Carsten Fritsch.
“Prices are under pressure because we’ve got more and more crude coming out of the ground”, said Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital in Miami.
“The U.S. has (cheap) crude supply and can keep runs high but the rest of the world is not looking so good…” “But the gasoline crack spread is also unraveling”, Smith said, referring to the difference between gasoline and US crude prices, which sets the profit margin for refiners. A strong greenback discourages crude purchases outside the U.S. because oil is priced in dollars.
“We’ve had record refining heading out of the driving season that should translate into higher stocks of refined products in fall and winter”.
“There is indeed a growing risk that seasonally weaker crude demand over the fall maintenance period could lead to surprisingly strong stockbuilds, with even lower outright prices required to bring about a supply side adjustment”, analysts JBC said in a note. OPEC also releases its monthly report on the oil market next Tuesday, and on Wednesday the worldwide Energy Agency (IEA) publishes its monthly oil market report.
As investors remain anxious about global oversupply, with OPEC and the United States crude oil production rising, the DoE said that US production rebounded last week from the prior week’s dip, increasing by 52,000 barrels per day to 9.5 million bpd.