United States oil price drops amid ample supplies

On the NY Mercantile Exchange, light, sweet crude futures for delivery in January, the most active contract, CLZ5, -0.05% traded at $41.81 a barrel, up 10 cents in the Globex electronic session.

This is in accord with a broadly held view that while oil prices in general will remain under pressure over the medium term, WTI prices may fall faster and further than Brent.

Big oil suppliers have started requiring prepayment when selling cargoes of crude and refined products to Venezuela’s PDVSA, in an effort to limit potential risks from the state-run company’s well-known cashflow woes, five sources from firms involved in the deals told Reuters.

“Oil markets are really moving range bound…mainly because fundamentals have yet to change”, said Daniel Ang, an investment analyst at Phillip Futures Pte Ltd. “Markets are a bit fearful that Iranian oil could come in”. Experts blame the drop on a massive supply glut from OPEC nations, as well as US oil production growth and a strong dollar.

WTI briefly fell below $40 in U.S. trade Thursday before recovering to close above that level.

Futures are down 0.8 percent this week after falling below $40 a barrel Wednesday for the first time since August.

Analysts at FXTM said that investor sentiment toward crude oil remains weak and this week’s relief rally may offer an opportunity for bearish investors to send prices back below $40 a barrel. The USA crude oil imports fell by 409,000 bpd to 7 MMbpd for the same period.

Oil has slumped about 45% in the past year amid speculation that the global glut will persist as the Organization of Petroleum Exporting Countries continues to pump above its collective quota and Russian output rises to a post-Soviet era high.

He said concern about China’s demand slowing down is being partially alleviated by a significant pickup in Indian demand, which is on track to soon replace Japan as the second-largest importer of crude oil after China. “We regard a quantity of 500,000 barrels per day as realistic, though this should already be priced in and thus pose no additional burden on prices”. The gasoline crack CL-RB1=R widened to more than $13.50 a barrel, the highest in 2-1/2 months.

Biman Mukherji contributed to this article.