Oil slips under $49 on inventory rise

The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on October 13, 2015.

US crude lost 42 cents or 0.90 percent at $46.22 a barrel as of 0008 GMT, after it settled down 2 cents at $46.64 on the previous session. A key reason for the 50-per cent slump in oil prices between June a year ago and the start of 2015 was owing to the sizeable extraction of crude oil from North American shale rock.

Brent’s November contract, which expires at Thursday’s settlement to be replaced as front-month by the December contract, fell by 60 cents to $48.55.

Cheaper barrels are a significant lure to companies as they eliminate jobs and defer expensive projects following a 40 percent plunge in oil prices in the past year.

Oil fell under $49 per barrel on Thursday, as selling continued after expectation USA government data will show a rise in inventories.

The stocks data “is pushing oil prices down, and the overall picture looks pretty bearish (for crude futures) as no producing countries seem ready to cut production”, said Robert Montefusco, a broker at Sucden Financial.

“This kind of illustrates there’s still a lot of oil out there”, said Peter Donovan, broker for Liquidity Energy in New York.

“After all, there are increasing signs that non-OPEC supply is already decreasing noticeably as a effect of the low prices”. But strong output data, including from OPEC itself, and expectations of Iranian oil returning to the world market, coupled with tepid demand from China, has rattled market confidence. “Our operations are therefore profitable even during a time of a sustained fall in the oil price”, Andrew Benbow, a spokesman for London-based Genel, said by e-mail. “Everything will come back to the fundamentals sometime”.

The crude build comes amid lower processing of oil in the U.S. as refiners shut for maintenance after the peak summer driving season. Output reductions are “purely a short-term measure, and in the future it will result in a greater misbalance of the oil market”, Energy Minister Alexander Novak said in an interview with CNBC. The EIA said that refineries processed 15.3 million barrels per day last week and ran at 86 percent of their total capacity.

Gasoline stockpiles fell by 2.6m barrels, as less of the motor fuel was turned out last week.

Despite those drawdowns, both markets followed crude’s path lower. Diesel futures fell 1.9% to $1.4557 a gallon.