Oil slips to $43 as United States oil stocks hit fresh record high

Oil slips to $43 as United States oil stocks hit fresh record high

USA crude prices fell Tuesday, hitting three-month lows.

Brent for September settlement fell 39 cents to $44.48 a barrel on the London-based ICE Futures Europe exchange, trading at a premium of $1.71 to WTI. At 521.1 million barrels, U.S crude oil inventories were at historically high levels for this time of the year.

Demand for crude oil remains on the rise. Goldman says that while there is indeed a glut of gasoline, it won’t be responsible for further declines in oil prices because it is a supply-side and not a demand-side problem.

Oil markets have been spooked recently by a glut of oil products, which has has been exacerbated by disappointing demand during the U.S. driving season. Refineries cut processing volumes during the peak-demand summer driving season amid swelling gasoline supplies and weak profit margins. “The collapse in capex is starting to impact output and we now estimate non-OPEC oil field decline rate has accelerated to 5%”, the bank’s analysts said in the report.

USA gasoline demand rose by a modest 0.8 percent in April according to the Department of Energy. The more-active October contract lost 56 cents to US$42.67. In the European gasoline market, the crack spread, or price difference between gasoline and Brent spot averaged 26 cents a gallon in June, the lowest June spread since 2014.

“We’re going to test support around $40″, said Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston.

Cheap crude has led refiners to produce more fuel worldwide, adding to a market already bloated with supply. At the same time, the number of active USA oil rigs has risen seven out of the past eight weeks as oil hit a high on the year of just over $50 a barrel in early June. Gasoline stocks rose by 452,000, dwarfing forecasts for a 40,000 barrel increase.

It was the sixth such increase over the past 10 months, according to the EIA.

August gasoline futures slipped 1.2 percent to $1.3062 a gallon, the lowest close since March 3.

“There is too much oil in the market, there’s an incredible amount”, said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. Ample U.S. inventories and imports are weighing on prices now, he said.

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