Crude oil had been trading on the upside over the past few days breaking above the $94 price and squeezing the spread against Brent oil to just $3
Traders showed concerns about oversupply following disappointing economic data from key oil-consuming regions. The HSBC China manufacturing purchasing managers’ index came in at a barely-growing 50.2, below the initial reading of 50.5. Eurozone inflation data fell in September to the lowest level since the worst of the financial crisis, while US consumer confidence dropped sharply in September, according to the Conference Board. Japanese industrial production plummeted to a new low at the end of the month.
Addition factors adding to pressure oil included a report by Reuters projecting that OPEC oil production hit a two-year peak in September on strong output from Libya and Saudi Arabia; and a big drop in gasoline prices as a key monthly contract expired. Another reason is that inventory in the US is near a five-year high of 358 million barrels (as on September 25). With shale gas production gaining traction, supplies are also increasing. These have combined to keep crude prices on a leash. A Reuter’s survey showed OPEC production lifted to two-year high in September.
International oil prices tumbled to their lowest in more than two years to close the month with US crude posting its biggest daily decline since 2012, as a drop in gasoline prices and end-of-quarter selling capped three
Natural gas ended the month an unexpected level closing at 4.125 in the middle of the conversion from summer air conditioning use to winter heating use. Natural gas is usually found near a seasonal bottom in late September. Prices pulled back slightly after weather forecasts showed warmer expectations than they had the day before. Cold weather should boost demand for home heating, and fears of an early or severe winter have recently made traders jump. Tuesday they balked at how high prices got. Some thought the market was inflated by technical trading in the face of record production.