Oil Extends Rebound Above $41 as Falling Fuel Supplies Trim Glut

On Thursday, Oil prices inched lower in European trade, after increasing over 3 percent overnight after a larger than expected gasoline draw reduce worries about global oversupply.

The West Texas Intermediate (WTI) price for September’s shipment rose by US$1.32 to US$40.83 per barrel in the New York Mercantile Exchange, Xinhua reported.

The rally fizzled out, however, even after industry data showed a decline in USA crude oil supplies.

With global oil inventories remaining at elevated levels, West Texas Intermediate crude – the USA benchmark – fell below $40 in afternoon trading amid signs of increasing US production and reduced geopolitical disruption.

Analysts polled by Reuters expect the U.S. government to report on Wednesday that crude stockpiles fell 1.4 million barrels last week after a surprise build the previous week that broke a nine-week drawdown.

PVM Oil Associates lead oil analyst Tamas Varga told the news agency: “Maybe the surprise drawdown in gasoline inventories helped future prices remain stable but that does not change the fact: the United States is flooded with oil”.

But US crude stocks were up 0.3 percent and 14.8 percent above the same point a year ago at 522.5 million barrels. The global glut of oil still weighs on the market and even though summer is a good time to make supply adjustments, it is already halfway over, the bank said in a research note. “Prices remain under pressure but we think they are likely to find a floor at around $40 and increase to $50 by the year end”, Weinberg said. Prices climbed 3.3 percent on Wednesday, the most in three weeks.

Morgan Stanley blamed the drop in prices on a stronger dollar, oversupply of refined crude oil products, and new oil data.

USA crude oil refinery inputs averaged about 16.9 million barrels per day during the week of July 29, up 266,000 barrels per day from the previous week’s average.

The price of USA crude dipped under $40 this week for the first time since April. “Demand from the U.S.is still pretty good”. Gasoline inventories probably fell by 1 million barrels last week.

“In the last 72 hours, there have been reports of successful negotiations to re-open blockaded oil terminals in Eastern Libya and USA airstrikes against Daesh (ISIS) in Sirte”.

Oil now remains more than 60% below June 2014 levels, when the prices started falling.