Oil down 3 percent on worry over OPEC output, US rig count

The era of cheap oil isn’t over.

“Oil has once again re-emerged as a real driver of how investors are gauging the trend for equities”, said Peter Kenny, senior market strategist at Global Markets Advisory Group in NY. It’s the first time the price has been below $40 a barrel in almost four months.

In June, supply disruptions in Canada and Nigeria supported prices above the $50-per-barrel mark. That means the closely-watched commodity is officially back in a bear market.

Oil majors ExxonMobil Corp, BP Plc, Royal Dutch Shell Plc and Chevron Corp each had a poor second quarter because of weak refining margins for crude. Prices dropped to a 13-year low in February, but have since risen around 60%, though they remain sharply lower than two years ago when prices hovered at around $100 a barrel.

The recent selling has been driven by a realization that the epic oil glut remains largely intact – and some US oil companies may make it worse by starting to drill more. “We’ve had crude builds during the summer, when we were supposed to be having runaway draws from record driving”.

Shares of Marathon Oil (MRO) are sliding 5.06% to $12.95 this afternoon as oil declines to its lowest prices since April. Oil refiners rocked by a market glut in Asia are finding some solace as what was expected to be a flood of fuel from China’s private processors is proving to be a benign trickle.

-Stubbornly high U.S. oil inventories, which rose by 1.7 million barrels in the week ended July 22, according to the U.S. Energy Information Administration’s Wednesday report.

That doesn’t count the thousands of drilled, but uncompleted wells in the USA that can quickly be tapped.

“We have more than ample supply around the world”, said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut.

All of this is great news for American drivers.

WTI average price is projected at $45.32 a barrel in 2016 with $55 a barrel in the last quarter.

(2) Hedge funds have established large short positions in crude of 300 million barrels, but past experience suggests the maximum short position could be at least 390 million, indicating there is more scope for short-selling to push prices lower.

The global economy continues to face headwinds despite improvements in labor.