Oil Hits 3 Month Low

Crude oil recovered from the very bottom of its trading range as traders took advantage of a drop in the US dollar to buy up the cheap commodity. The global glut remains the prime focus as lower growth calculates to lower demand. WTI is trading at 42.68 while the international benchmark Brent oil holds at 44.78. The strong US dollar has been weighing on the commodity sector after a rash of positive economic data may push the Fed to up their outlook for rate increases at its meeting beginning today.

The BBC News reported that Oil prices have fallen to a three-month low, hit by rising concerns that a global oversupply of both crude and natural gas will dampen prices.
[wibbitz]b9b61c68bd3964f349814fbaf1ace4368[/wibbitz]

US oil fell 2.4% to $43.05 a barrel, its lowest level since April, meaning it has now fallen by 12% so far this month. Brent crude dropped 2.1% to $44.75, its lowest level since 10 May.

“Crude oil markets have been under pressure as oil supplies have started growing with the resumption of output from the capacity lost due to wildfires in the Canadian Oil Sands,” said EY energy analyst Sanjeev Gupta. Data from market intelligence firm Genscape also suggested US production had increased. Inventory at the Cushing, Oklahoma delivery base rose by 1.1 million barrels in the week to 22 July.

“Supply continues to return from disruptions, refined products are severely oversupplied, crude demand is falling well short of product demand, and key product demand is decelerating,” Morgan Stanley said in a note.

On Friday, data showed the amount of US oil and gas extraction points had increased for the fourth week in a row.

The global oil market is “severely oversupplied” with gasoline — with stocks at a five-year high — serving as a blow to crude prices from next month, reckon Morgan Stanley analysts led by Adam Longson.

In a report published on Sunday, the analysts foresee “worrisome trends” for oil supply and demand, led by refineries generating too much gasoline in recent months. Faced with the need to cut back on capacity utilization to protect profit margins, these refineries are set to crimp crude oil purchases and drag prices lower, the analysts say.

A newly released report indicates that analysts at Citigroup Inc. also take up the refining theme. “Refinery margins are under pressure due to falling gasoline cracks as strong gasoline demand growth has been met by even stronger refinery supply,” Citi analysts wrote. They believe that the elevated stock of crude and petroleum product, macro concerns, and a stronger U.S. dollar are all headwinds for oil prices.

CNBC wrote that information from market intelligence firm Genscape pointed to an inventory rise of 1.1 million barrels at the Cushing, Oklahoma delivery base for U.S. crude futures in the week to July 22, said traders who saw the numbers.

Investors have become less optimistic that markets will balance quickly amid a massive overhang in refined products, particularly gasoline, despite forecasts for record U.S. summer driving.