Oil price hits lowest level in 6½ years

US benchmark West Texas Intermediate (WTI) for September delivery dropped 17 cents to Dollars 42.06 in late-morning trade after falling below USD 42 a barrel earlier in the session, the lowest price since March 2009.

“The strength in refined products is pulling crude prices higher”, said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

This week, we got yet more evidence that oil supply is greater than demand. At the current rate of oil production, the supply will exceed demand by 1.4 million barrels a day until the end of the year.

Oil prices fell to a six-year low of $43.28 per barrel, pretty much guaranteeing bargains at the pump this fall with experts saying gas could average less than $2 a gallon by winter.

“While U.S. crude oil production this year is expected to be 100,000 barrels per day less than previously forecast, oil output is still on track to be the highest since 1972″, said Adam Sieminski, Administrator with the EIA.

Gasoline reserves also fell by 1.3 million barrels to a total of 215.5 million last week.

U.S. crude neared its lowest for 2015 on Thursday after refinery outages and data indicating a large build at the key U.S. delivery point for oil heightened worries about a global supply glut. Commerzbank analyst Carsten Fritsch said he didn’t expect an accelerated drop in prices, but rather “a slow grind lower”: “As long as (Whiting) refinery is out of service this will add to stocks in the US which is WTI’s main driver now”.

Brent futures were trading at $49.22 a barrel, flat from their last settlement and still some way off from their 2015-low of $45.19. China also devalued its currency, suggesting economic growth there was softer and could cause lower crude demand. “US shale players are actively cutting cost and some players are profitable at less than US$30 per barrel”.

The American Petroleum Institute will release its inventories report Tuesday, while Wednesday’s government report could show crude stockpiles fell by 1.6 million barrels in the week ended August 7.