By July 28, 2016 Read More →

Oil prices down, hits 3-month lows on reported Cushing build

oil prices

Oil prices were down after a fresh stock build at Cushing, Oklahoma delivery hub for US crude futures.  Nabors photo.

Goldman sees oil prices in $40-$45 rang through mid 2017

By Barani Krishnan

NEW YORK, July 28 (Reuters) – Oil prices fell nearly 2 percent on Thursday, hitting three-month lows, after a fresh stock build at the delivery hub for U.S. crude futures added to concerns that producers were pumping more than needed.

Surplus barrels of gasoline have already made the glut developing this year more worrisome to some than the crude oversupply of the past two years that had halved prices. U.S. Gulf Coast gasoline stocks hit record highs last week for a July month, while East Coast inventories reached all-time peaks, government data showed on Wednesday.

Market intelligence firm Genscape added to the bearish sentiment on Thursday, reporting a build of nearly 328,000 barrels at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to July 26, traders who saw the data told Reuters.

U.S. crude’s West Texas Intermediate (WTI) futures fell 63 cents, or 1.5 percent, to $41.29 a barrel by 11:48 a.m. EDT (1548 GMT). WTI earlier fell to $41.21, its lowest since April 20. WTI has lost 20 percent from its 2016 high of $51.67 on June 9, technically placing it in bear market territory.

Brent crude futures were down 73 cents, or 1.7 percent, at $42.74, after falling earlier to $42.71, the lowest since April 19.

Oil prices are still up about 60 percent from 12-year lows of $26-$27 in the first quarter. But the rally has faded since they breached $50 in May.

“Our price target right now is $38 for WTI,” said Matthew Tuttle, chief executive of Tuttle Tactical Management in Riverside, Connecticut. “We think there’s more to go on the downside because the move that we saw up to $50 was fundamentally-driven but that created more supply.”

Oil companies have also reported lower earnings lately, hit by refining margins.

Energy major Royal Dutch Shell reported a more than 70 percent fall in quarterly profit on Thursday, well below analysts’ estimates. Rivals BP and Statoil have also reported worse-than-expected second-quarter results.

Some have a more optimistic view on oil.

Analysts at Goldman Sachs forecast a $45-$50 price range through mid-2017, based on their forward assessment of oil‘s supply-and-demand balance.

“It is important to emphasize that while timespreads weakened as oil prices declined last month, the recent move lower in oil prices has occurred alongside relatively stable timespreads,” Goldman’s analysts said in a note.

(Additional reporting by Christopher Johnson in LONDON; Editing by William Hardy and Marguerita Choy)

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