US crude oil edges back over $40, but oversupply still weighs

The fear is that the backlog will force refiners to dial back their demand for oil, deepening crude stockpiles.

Global fuel inventories are brimming as refineries have churned out huge volumes of diesel, gasoline and jet fuel but the supply glut has diminished refining margins and demand failed to keep up with supply.

Crude prices might take an upward trend in the fourth quarter as refinery maintenance winds down and fuel demand picks up.

The report also showed that crude oil inventories rose by 1.4 million barrels last week. This has been put down to strong output from Iraq and Nigeria, together with key OPEC exporter Saudi Arabia continuing to keep its output at near record levels.

WTI extended this downtrend on Monday as persistent concerns over the crude oil oversupply situation were compounded by a survey reflecting record-high output by OPEC nations last month.

Its survey found that supply from…

It said that despite recent declines, the number of U.S. oil rigs remains well below the level which would stop United States output falling. In spite of being in the middle of the peak summer driving season in the US, gasoline stocks are well beyond the upper limit of the average range, according to the Energy Information Administration.

Meanwhile, the number of rigs operating in US fields added by 44 in July, the most in a month since April 2014, data from oil services company Baker Hughes showed.

WTI crude futures for September delivery rose 36 cents to US$39.87 a barrel, at 11:06 am, a 0.9 per cent gain.

The U.S. Energy Information Administration said Wednesday that U.S. crude inventories, excluding the Strategic Petroleum Reserve, increased by 1.4 million barrels during the week of July 29.

Gasoline stocks slumped by 3.3 million barrels, versus forecasts for a 200,000-barrel drop.

All eyes will be watching the weekly USA oil stockpiles and production report slated for release Wednesday.

Oil prices dropped briefly below $40 per barrel during midday trading Monday.

The bank said the economic outlook was also weak: “We expect global growth to move below consensus estimates”, Morgan Stanley said.

Supply problems in Nigeria and Canada helped prices climb above $50 per barrel in June, but the price of crude has dropped significantly since then, surrounded by more proof that non-US output and USA inventories continue to grow.

“The price of oil is getting people nervous again”, said Allan Small, a senior adviser at HollisWealth.