WTI oil futures push higher on bets for USA weekly supply drop

A new fall in the price of crude oil could pave the way to a fall in the price of petrol and diesel at the pumps. The last time it fell to $39 was in 2004.

OPEC’s crude production averaged 31.38 million barrels per day, according to OPEC’s recent monthly oil market report. Gold prices had sunk 0.5 percent last week – amid speculation of a rate hike in the US that would have boosted the dollar – dropping to $1,074.25 Thursday, the lowest since February 2010. But gains in demand have been outpaced by vigorous production from the Organisation of the Petroleum Exporting Countries, OPEC, and resilient non-OPEC supply, with Russian output at a post-Soviet record and likely to remain robust in 2016 as well.

In its 2015 edition of its World Energy Outlook (WEO-2015), the IEA report finds that the plunge in oil prices has set in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply, although the adjustment mechanism in oil markets is rarely a smooth one.

This helped push front-month US crude futures up nearly half a dollar to $41.13 a barrel at 0803 GMT, although the gain followed an over $1 fall the previous session. “We just have to wait and see what the reaction of the market will be if there is a reduction in crude oil supplies from the Middle East”. The meeting will be vital for the crude oil market.

U.S. crude oil prices have now been lower than US$50 per barrel for longer than they were during the height of the global credit crunch in late 2008/2009, and the forward curve also shows less price increases today than it did then. “It looks very bearish”, said Oystein Berentsen, managing director of crude oil at Singapore-based Strong Petrochemical.

Crude oil extended its slide into a second week as U.S. stockpiles rose more than expected and the IEA said that OECD inventories had reached a record above 3 billion barrels.

Speculators are betting on a renewed drop in price. The majority of interest revolves around put options, which gives the sellers the right to sell futures at $40 and $45 a barrel. The nation is unconcerned about the impact this additional supply may have on prices, which already reflect the expected increase in Iranian shipments, Oil Minister Bijan Namdar Zanganeh said Tuesday at a news conference in Tehran.

“Surprisingly, US drillers are putting rigs back to work in the oil fields after more than two months”.

But oil and other commodities could also come under renewed downward pressure on fears the attacks will further slow the global economy.