September Crude Oil futures reached a new low for the year this week as persistent oversupply issues continued to feed the bear market. There appears to be no letup in sight for the resilient U.S. and OPEC production.
Recent U.S. Energy Information Administration crude oil inventory data for the week-ended July 31 was actually friendly, but it was not impressive enough to scare short-sellers out of the market. The report showed a drawdown of 4.4 million barrels, much better than the estimated 1.3 million barrels.
Two factors offset the bullish news: an increase in stockpiles of gasoline and other finished products and a rise in daily U.S. oil production.
Shale oil producers continue to flood the market with oil at a tremendous rate. Lower production costs are helping these producers to move oil at a superior rate to their competitors. U.S. production rose last week by 52,000 barrels a day to 9.5 million barrels a day.
Worries about China’s economy and the possibility of a stronger U.S. dollar because of an expected Federal Reserve interest rate hike in September are also weighing on demand. Furthermore, we’ve hit the peak of the summer demand season which will likely mean crude oil demand will drop further into the fall. With fundamental support dropping, prices are expected to continue to feel pressure.
Iran is also shaking up the markets as its oil minister has vowed to ramp up production once the sanctions against the country…