Hedge funds reduced bullish bets on the U.S. benchmark to the lowest level in five years as the world’s biggest oil companies including BP Plc said prices will be lower for longer.
“With prices back around $50 per barrel, there is still an economic boost for oil importers despite the exchange rate”, he pointed out.
U.S. crude oil fell to its lowest finish since March after a larger-than-expected fall in U.S. crude inventories was overshadowed by a rise in supplies of oil products.
Oil prices hit multi-month lows on Wednesday after a surge in gasoline stockpiles in the United States as the summer season, the country’s biggest demand period for motor fuels, neared its end.
Crude inventories probably declined by 1.63 million barrels through July 31 for a second weekly drop, according to a Bloomberg survey of analysts before an Energy Information Administration report today.
WTI for September delivery lost as much as 86 cents to $46.26 a barrel in electronic trading on the New York Mercantile Exchange. Iran expects to raise output by 500,000 barrels per day (bpd) as soon as sanctions are lifted and by a million bpd within months, its Oil Minister Bijan Zanganeh has said.
Brent futures plunged $11.39, or 18.6%, last month as ongoing worries over a global supply glut drove down prices.
“But given how oversupplied the market is, with Saudi output at record highs, the mere prospect of new oil will be bearish for sentiment”.
Brent, the global benchmark, was down US$2.35, or 4.5 per cent, at US$49.86 a barrel by early afternoon.
On Wednesday, the price of a barrel of Brent will be in a range of $50.20-50.75. New York-traded oil tumbled to a more than four-month low of $45.08 on Monday. Last week it dropped below the market expectations giving a push to the oil price that for a short while.
Although U.S. crude oil inventories fell by more than expected last week, gasoline stocks unexpectedly rose.
Over the medium term, high levels of US production have also contributed to the glut and helped to keep prices low.
“Prompt prices are being driven by demand… and with run cuts on the way in Asia (due to falling margins), nearby crude prices and spreads (both in Asia and in the Atlantic Basin) will remain under pressure”, Energy Aspects said.
