After growing stockpiles strengthened fears of another major slump forming, oil prices dropped more than 1 percent on Monday.
Genscape, a market intelligence syndicate, reported a delivery hub in Cushing, Oklahoma for crude futures witnessed a supply growth of 26,460 barrels the week of July 15.
According to Morgan Stanley, headwinds are increasing the market, but the firm still projects a rebalancing of the supply-demand in oil by the middle of 2017. The company issued the statement, “Tail risks are admittedly large in both directions, as geopolitics add to uncertainty.”
By 11:41 a.m. CT, Brent crude was down 1.8 percent. The fall of 84 cents brought prices totaling $46.77 per barrel. It dropped more than $1 earlier to a low of $46.50.
West Texas Intermediate (WTI) crude was also down 1.8 percent. The fall of 82 cents brought prices down to $45.13 per barrel after a low of $44.86.
On July 26, a labor union that will execute a 24-hour strike by Wood Group oil and gas maintenance workers employed at Royal Dutch Shell’s platforms in the North Sea is expected to further disrupt operations.
“We are maintaining a bearish trading stance as we still see an ultimate price downdraft in WTI and Brent to about $37 and $38 areas respectively,” said Jim Ritterbusch of Ritterbusch & Associates out of Chicago.
Morgan Stanley stated in one of its reports that the demand for both diesel and gasoline were lagging petrochemicals. According to the report, this muddies the outlook for oil. The report continued, “”A rapid rise of non-petroleum products (demand) is boosting total product demand, but this is unhelpful for crude oil. Based on the latest data, even our tepid 800,000 barrels per day growth estimate for global crude runs looks too high.”
Government data showed that U.S. distillate and gasoline stacks had increased without warning last week. This folded margins for refiners at the peak of the summer’s driving season, a time when fuel demand is usually healthy.
Oil prices have risen almost 75 percent since reaching 12-year lows of almost $27 for Brent and $26 for U.S. crude in the first quarter. Since then, the increase has ceased since the two numbers reached $50 per barrel back in May as worries intensified about higher prices inciting more production.
Article written by HEI contributor Briana Steptoe.