Oil prices down, gasoline stocks up
Despite early gains, oil prices fell on Tuesday as investors concerned about slowing demand and increasing US production questioned OPEC’s ability to rebalance the market.
Brent crude futures were down 55 cents to $48.79/barrel by 12:43 p.m. EDT, down from an intraday high of $49.72. US WTI futures were down 53 cents to $45.90/barrel, also down from the day’s high of $46.78.
Later on Tuesday, the American Petroleum Institute will release data on crude production and inventories and on Wednesday, the Energy Information Administration will release its information on US crude stocks. This week, OPEC will also release monthly supply and demand data.
“We really need to see some of the data starting to support the idea that global inventory levels are coming down,” Saxo Bank senior manager Ole Hansen told Reuters.
“Almost as importantly, there have been some signs that there has been some wavering in terms of demand growth.”
In the United States, high gasoline inventories have boosted concerns about demand as consumer spending expectations hit a three-year low last month and vehicle sales have fallen year-on-year for four consecutive months.
According to Reuters, barrels of North Sea crude changed hands at their lowest levels since late 2015 on Monday.
As well, manufacturing activity in China has faltered and commodity imports have dropped.
US crude output has increased by over 10 per cent since mid-2016 and now sits at 9.3 million barrels per day. The revived US oil industry pumps close to the output of Russia and Saudi Arabia.
Speaking with Reuters, Norbert Ruecker, head of macro and commodity research at Julius Baer said “U.S. oil production surpassed expectations in terms of an early bottoming and swift uptick, and is set to expand further based on the latest drilling momentum.”
“We see prices between $45-50 per barrel as fundamentally justified. Consequently, we have raised our view to neutral from bearish and closed our short position. An extension of the supply deal beyond June looks likely but its effectiveness will remain questioned.”
Saudi Arabia is trying to reassure investors and said on Monday that it would “do whatever it takes” to rebalance the oversupplied market.
