Oil prices give up early gains as market glut persists

Internationally traded Brent was at $44.98 a barrel, up over a percentage point and half a dollar, testing resistance at $45 per barrel.

Traditionally, such tensions do send oil prices upwards, albeit for a limited period.

US futures fell 17 cents to $40.57 a barrel, after earlier falling toward $40, a key milestone for the oil market that once breached could see oil fall further, to lows not seen since 2009.

West Texas Intermediate for December delivery, which expires Friday, fell 68 cents, or 1.7 percent, to $40.07 a barrel at 9:21 a.m. on the New York Mercantile Exchange.

Please enter your email. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday.

Crude oil prices remain near the bottom of their trading ranges but had small gains on Monday.

A narrower spread tends to encourage a greater flow of oil from overseas into the US market as crude grades that are pegged to the pricier Brent benchmark become more affordable.

“The Paris tragedy may warrant some uptick in geopolitical premia but this is likely trumped by near-term negative impacts on European oil demand”, said Ed Morse, global commodities strategist at Citi in NY.

USA crude inventories grew by 252,000 barrels last week to 487.3 million barrels, close to record highs, according to data from the Energy Information Administration (EIA), highlighting that more oil is being produced than is needed. “As we go forward, we’re going to start to see some of the petroleum products building, gasoline, distillates and if we have crude oil inventories not declining, even building, we’re going to stay in a record oversupply situation”.

“The market is actively seeking storage solutions”, Jefferies said in a note, but with January 2017 prices around $6 a barrel above those for January 2016, the spread is too low to make floating storage attractive as freight costs still have to be included.

After the attacks, analysts said that oil and other commodities might suffer further if the threat of terrorism cut demand.

Most open interest in options expiring in December is clustered around put options – which give the holder the right, but not the obligation, to sell Brent futures – at $40 a barrel. They feel the direction of oil prices will be more influenced by whether there is any reduction in the oil glut that is keeping the prices down.