The same chronic factors that have been pushing the oil price down, seem to be have provided the downslide with a momentum of its own, as crude futures dropped still further on Thursday.
The continuing oversupply situation, with no apparent hope on the horizon for any reduction in supply by the producer countries, and continuing concern about the Chinese economy, continue to weigh the oil price down. The continued U.S. dollar (USD) strength and the potential for a further strengthening amid speculation of an interest rates hike by the Fed serves only to place additional downward pressure on the oil price.
Derek Salvino, vice president for market research with Tradition Energy said in a note that, “Record production levels by several OPEC members and Russia, multi decade high production levels in the U.S., expectations of increasing Iranian exports and indications of decreasing fuel demands in China have combined to erase 80% off the spring rally and indications that the markets slump could be prolonged continue to drag oil prices lower.”
West Texas Intermediate futures (CLU5, +0.46%) on the NYMEX fell by 49 cents to close at $44.66 per barrel to settle at its lowest price since March.
The global benchmark Brent crude (LCOU5, +0.48%) shed 7 cents to fall to $49.52 a barrel on the London ICE Futures Exchange.
Reports of a fall in U.S. crude oil inventories from the Energy Information Administration (EIA), which would usually introduce a degree of bullishness into the market, had no effect with the decrease countered by an increase in inventories of gasoline and other finished products.
Norbert Ruecker, head of commodities research at private banker, Julius Baer, said, “Shale oil producers are lowering costs swifter than expected, proving their superior [price] competitiveness within the industry, and consequently surprising with resilient production.”
Also, the rate of oil production in the United States increased by 52,000 barrels daily to 9.5 million barrels per day.
Ruecker added, “Taking further into account that we are at the peak of the summer demand season and entering the shoulder autumn months, fundamental support to prices has softened but not to the extent the selloff implies.”
Looking at the near term, but even lower longer term, Julius Baer has trimmed its forecasts for Brent prices to a range between $55 and $60 per barrel.
The market has been further depressed by reports from Iran that its intention is to increase its crude oil production as rapidly as possible as soon as the nuclear deal with Iran comes into force and international sanctions are lifted.