US September crude ends higher at expiry, Brent slumps

US crude oil fell towards $40 a barrel on Thursday after overnight data surprised analysts with a jump in US oil inventories.

On Thursday, crude prices edged up 34 cents to $41.14 a barrel on the New York Mercantile Exchange, a day after closing at $40.80, which was the lowest close since March 2, 2009. It came in at 47.1 points for August, compared with 47.8 points in July. Actually, the reading was slightly better than feared, which is perhaps allowing some slight optimism and at least not created a stock market crash.

Friday’s fall, to $39.86, was just the latest indicator of a vast shift in the energy landscape over the past year.

EIA’s updated projection remains subject to significant uncertainties: the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.

The world’s ninth-largest oil producer, Mexico buys options that will guarantee a minimum price for its crude and so protect its public finances from unexpected oil shocks. Leading members of the Organization of Petroleum Exporting Countries are maintaining output, while Citigroup Inc. predicts crude may slide to as low as $32/bbl, a level last seen during the world financial crisis. “The trend is down and vicious”, Bieber said in a brokerage note. Despite the weak market, Saudi Arabia boosted its exports.

Oil traders also eyed China economic reports which reported that crude imports rose by more than ism that 10., 4% at 194% in the year-to-date period to increase market optimism that demand would improve.

Marathon Oil Corp. was the biggest loser on the S&P 500 index with a 7.2 percent drop.

Energy stocks on the SPDR S&P 500 (SPY) are down more than 20% over the past three months.

Until the negative headline momentum subsides, it appears as if oil investors will continue to feel the pain. Gasoline is averaging $2.63 per gallon, compared with $3.44 a year ago.

“If Brent Crude were to move to the $40 per barrel mark, the prospect of some enterprising retailers selling fuel for £1 per litre will make a return”, said spokesman Rod Dennis.

The Indian basket, made up of 73 percent “sour” grade crude from Oman and Dubai and the balance by “sweet” grade Brent, fell to its lowest of $43.36 in January, provoking the Reserve Bank of India to make the first of its interest rate cuts this year after nearly two years.