Glut Worries Push oil Prices Lower; US oil below US$44

NEW YORK: World oil prices sank for a third straight session on Tuesday (May 3), pulling back from 2016 peaks on renewed worries about the supply glut.

After a month of gains, traders were looking to sell after weak US and Chinese manufacturing reports and a day ahead of the weekly US inventories data. The benchmark US futures contract fell below US$44 a barrel.

The downturn came “as fears of both a weaker demand outlook and elevated supply combine to overshadow recent bullishness,” said Robbie Fraser, commodity analyst at Schneider Electric.

West Texas Intermediate for delivery in June tumbled US$1.13, finishing at US$43.65 a barrel on the New York Mercantile Exchange. In London, Brent North Sea crude for July delivery, the European benchmark, closed at US$44.97 a barrel, down 86 cents from Monday’s settlement.

“There are renewed concerns about demand that are starting to materialise in the aftermath of the US ISM factory number which was subpar,” said Bart Melek of TD Securities.

The US number, released on Monday, was followed on Tuesday by a contraction level for China’s manufacturing sector from private firm Caixin Insight Group that Melek called “a bit of a disappointment.”

“It seems the market is now focusing on the possibility that demand might be a bit slower as we move into 2016 and 2017,” he said.

Prices have fallen about 60 percent since oil fetched above US$100 a barrel in mid-2014 amid excess supplies that analysts predict will not rebalance with demand for a long time.

The US Department of Energy is expected to report on Wednesday a smaller increase in commercial crude inventories than last week’s 2.0 million barrel gain as the stockpiles remain at historically high levels.

The 13-nation Organisation of the Petroleum Exporting Countries reportedly increased production in April “helping to counterbalance the support of declining US output,” said Tim Evans of Citi Futures.

Courtesy:  channelnewsasia.com