Oil prices edge down as slowing demand adds to high output

Oil prices are on course to fall by more than a third this year as big suppliers such as Saudi Arabia and Russian Federation have continued pumping crude in a bid to defend their market share. The biggest to close is Enbridge Inc.’s Ozark pipeline, which was booked to carry about 200 000 barrels a day this month to Wood River, Illinois, from Cushing.

The Dow Jones industrial average fell 0.66 per cent to 17,603.87, the S&P 500 lost 0.72 per cent at 2,063.36 and the Nasdaq Composite dropped 0.8 per cent to 5,065.85.

Front-month US West Texas Intermediate crude futures were trading at $37.22 per barrel at 0621 GMT, down 65 cents or 1.72 percent from their settlement in the previous session. “Which means that most of the global surplus will have to be stored in still available storage capacity in the United States”, Bjarne Schieldrop chief commodity analyst at SEB in Oslo said.

U.S. oil production is expected to remain above 9.1 million barrels per day, which would bring little respite to the crude oversupply that has suppressed prices for more than a year, analysts said.

“OPEC members should find a solution to (fall of oil prices) as this situation is not economically in their interest…”

Prices plunged overnight after the U.S. Department of Energy reported a 2.6 million-barrel expansion in domestic crude stockpiles, spurred by higher imports and an uptick in production.

Nigerian Government had predicated its 2016 budget on a benchmark oil price of $38 per barrel.

NuStar Energy and ConocoPhillips announced Wednesday they were loading “what they believe to be the nation’s first export cargo of US-produced light crude oil” since the ban was lifted.

“The imbalance in the global oil market has been diminishing in 2H15, but the hope for a rebalancing in 2016 continues to suffer serious setbacks”, the bank said, reflecting a market consensus that meaningfully higher prices are not expected before late 2016. Stockpiles probably dropped by 2.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

The price of oil began falling in mid-2014 as surging output from OPEC, Russia and United States shale producers outpaced demand.

Cheap oil this year has benefited US drivers, who on Thursday paid an average of $2 a gallon for retail gasoline, according to motor club AAA.

“Most likely, production would disappoint us and remain above 9.1m barrels/day”, he added. Brent stood less than a dollar away from its 11-year low of $35.98 reached last week. WTI finished the session down $1.27, or 3.4 per cent, at $36.60.