The weaker US dollar has done little to help crude oil prices. WTI fell 27 cents this morning to reach 41.01 while Brent oil bucked the trend but only
The weaker US dollar has done little to help crude oil prices. WTI fell 27 cents this morning to reach 41.01 while Brent oil bucked the trend but only gained one cent to 46.94. Crude has been steadily declining since the release of week EIA stocks. West Texas Intermediate crude fell a second day on Wednesday, losing 0.7 percent near the lowest price this year, following a 4.3 percent tumble on Wednesday that was the steepest one-day retreat since July 6. Brent oil lost 0.6 percent extending its lowest settlement since January.
A surprise 2.62-million barrel increase in U.S. oil inventories fueled the losses, with analysts projecting an 820,000-barrel drop. Energy producers and mining companies led declines in the S&P 500, with both industry groups down at least 1.2 percent. Oil has fallen 30 percent from this year’s peak amid mounting concern over a global glut in the commodity.
“What won’t be lost on investors is that U.S. oil prices have fallen nearly 16 percent since the July FOMC meeting,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., said in a client note. “This will prove disinflationary.”
The dollar was on the defensive against the euro and yen on Thursday, having pulled back sharply after Federal Reserve meeting minutes suggested that policymakers were in no hurry to raise interest rates.
Shares of the world’s biggest oil companies were battered after the report, with Exxon Mobil, BP, Marathon Oil, Chevron and ConocoPhillips all sliding to multiyear lows.
Oil supplies typically decline in the spring and summer because refiners make more gasoline to meet driving demand in the summer. That’s what analysts expected to see in the latest weekly report from the Energy Information Administration. But instead the agency said commercial inventories increased by 2.6 million barrels last week. That was a jolt to analysts and investors who have seen the price of oil plunge because there’s too much supply on the market and not enough demand.
Energy companies invested heavily in drilling over the past few years, when the price of oil was generally over $100 a barrel. A combination of increasing supplies and slow growth in the world economy, including weaker growth in China and a shrinking economy in Japan, cut into demand and made for a big drop in prices in the second half of 2014.
That trend resumed this summer, and energy companies have slashed jobs and curtailed drilling activity in response. The bigger picture is one of strong demand for gasoline and falling oil output, which should give some support to prices over the rest of the year,” analysts said. Many expect oil to finish the year at $50 per barrel.