Oil Traders Continue To Set New Lows

Crude oil continued to decline on Tuesday morning remaining bearish since last Thursday. Crude oil is trading at 42.33 down by 9 cents while Brent oil is trading at 48.61 drifting below its support level. Monday’s disappointing Japanese GDP and the horrible print of Empire State Manufacturing reduced implied demand for energy products.

Oil prices are trading lower today with WTI declining by 0.9 percent to the lowest level in six and a half years touching a low of $42.12 per barrel as oilfield services firm Baker Hughes reported its oil rig count rose for a fourth straight week. The number of rigs drilling for oil in the United States rose by 2 from the previous week, bringing the total to 672. Drillers had 1,589 rigs online at this time last year.

News that Oman produced a record-breaking 1 million barrels per day in July also weighed on oil prices.

News that Kuwait’s 200,000-barrels-per-day Shuaiba refinery had shut following a fire limited daily losses.  The contract traded just below Friday’s close by 1355 GMT at $49.18 a barrel. The Brent September contract expired on Friday. Over the past two weeks, US crude prices have fallen by more than 10 percent on US supply concerns. Brent has fallen by around 4 percent.

Production by the Organization of the Petroleum Exporting Countries is running well above demand, filling stockpiles worldwide.

Iran is expected to increase its oil exports once Western sanctions are lifted after ratification of a recent nuclear deal. “The oversupply story remains well intact, which fuels the bearish sentiment,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. Many money managers and hedge funds agree that oil prices will likely remain low for a while as they cut net long positions of Brent futures for a fourth straight week to the lowest since December 2014, Intercontinental Exchange data showed.

“The end of the summer driving season and the start of refinery maintenance season will weigh on near-term demand and pressure prices,” said Societe Generale oil analyst Michael Wittner.

New Iranian oil supply, coupled with a strong pipeline of oil production projects in North America, the Middle East, West Africa and Kazakhstan, will keep oil output high for the next two years and weigh on oil prices, BMI Research, a unit of Fitch, says.

It says a “rising overhang of crude will maintain downward pressure on Brent” and expects oil prices to average $56and $55 for 2016 and 2017, respectively, and $57 in 2015. Although oil prices will fall below the commercial breakeven cost for many new oil projects, they are insensitive to short term price slumps due the time it will take to bring them on line.