Oil Prices Bounce Up & Down But Make No Headway

Crude oil remains in a fragile state bouncing up and down on inventory, supply, demand and production but all in all the commodity is making very little headway.  Gains here and losses there WTI remains tied to the $45.00 price level which is well below the high touched when Russia made the headlines on an invasion into the Ukraine. That weekend not so long ago crude oil touched $106. The problems and tensions in the Ukraine continue but oil has dropped more than 55%.

This morning crude oil is trading at 45.01 gaining 10 cents in the Asian session while Brent oil declined 10 cents to 48.23.

Oil prices rose as much as 1 percent yesterday, boosted by inventory draws at the U.S. crude futures’ delivery hub although gains were capped by tumbling equity prices on Wall Street. Market intelligence firm Genscape estimated a drawdown of 625,000 barrels out of the Cushing, Oklahoma delivery point for U.S. crude in the week to Sept. 22.

The Genscape estimate, coming after a stockpile drop of 462,000 barrels at Cushing reported by the U.S. Energy Information Administration last week, drove up prices of both U.S. crude and global oil benchmark Brent.

On Wednesday alone, U.S. crude prices fell 4 percent after the EIA reported a big build in gasoline stockpiles. The higher gasoline supplies came after the end of the peak U.S. summer driving season, raising concerns about demand for motor fuels which is usually weaker in autumn. Many analysts think the long-term outlook for crude will stay downbeat as inventories pile and demand slows further into winter.

The most recent “This Week in Petroleum “states that low oil prices, if sustained, could mark the beginning of a long-term drop in upstream investment. Oil prices reflect supply and demand balances, with increasing prices often suggesting a need for greater supply. Greater supply, in turn, typically requires increased investment in exploration and production (E&P) activities. Lower prices reduce investment activity. Overlaying annual averages of the domestic first purchase price (in real terms) on oil and gas investment reveals that upstream investment is highly sensitive to changes in oil prices.

Oil markets remained subdued in early trading in Asia on Friday after weak data from Japan reinforced concerns over global economic growth.

Japan’s core consumer prices fell 0.1% in August from a year earlier, government data showed on Friday, marking the first year-on-year drop since April 2013. The index includes oil products but excludes fresh food prices. HSBC cautioned not to over-focus on weak China data, arguing that fully developed economies were also slowing.