Oil Stays Below $47

Oil traded further below $47 a barrel on Wednesday after an industry report said US inventories increased, reviving concerns that a three-year supply glut is far from over.

Brent crude was down 15 cents at $46.50 a barrel. It reached a seven-month low of $44.35 on June 21. US West Texas Intermediate crude fell 24 cents to $44.00, CNBC reported.

The American Petroleum Institute (API) said on Tuesday that US crude inventories rose by 851,000 barrels, while analysts expected a decline. Inventories of gasoline and distillates also increased.

“The report was disappointing,” said Tamas Varga of oil broker PVM, although he added that the downside reaction of prices to the API figures had been “muted” so far.

A rise in US stocks would suggest global supplies are still ample despite the efforts of the Organization of Petroleum Exporting Countries and 11 other producers to cut output by 1.8 million barrels per day from January 2017. 

The producers are trying to get rid of a supply glut which prompted prices to slide from above $100 a barrel in mid-2014.

OPEC and its allies agreed on May 25 to extend the supply cut into 2018, but Brent has fallen from as high as $54 per barrel then on rising production from the United States and from Nigeria and Libya, two OPEC members exempt from cutting output.

Traders will be awaiting the US government’s official supply report for confirmation of the API figures. Ian Taylor, head of the world’s largest independent oil trader Vitol, said Brent will stay in a range of $40-$55 a barrel for the next few quarters as higher US production slows a rebalancing of the market.

Analysts at JBC Energy in a report saw room for prices to recover.

“While the physical crude market remains steady at best, it is worth noting there is now significant room for speculative support for prices to develop if a catalyst were to emerge,” JBC said.

Caption:

API said on Tuesday that US crude inventories has risen by 851,000 barrels.