Oil ‘still a supply story’ as Brent falls to $48

Oil declined for a fourth day as a rebound in US drilling added to signs producers will keep pumping crude amid a global glut.

Futures slid 1.2 per cent in New York, dropping below the lowest close since March 2009. The number of rigs seeking oil rose by six to 670 for a third weekly gain, Baker Hughes data shows. Societe Generale and JPMorgan Chase & Co cut their price forecasts on weaker demand growth and oversupply.

Oil has slumped more than 25 per cent since this year’s peak in June amid signs the global surplus that drove prices into a bear market will be prolonged. Opec’s largest members have sustained record output, while US inventories remain more than 90 million barrels above the five-year seasonal average.

“It’s still a supply story,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “There is not a lot of upside for oil.”

West Texas Intermediate for September delivery fell 52 cents to $43.35 a barrel on the New York Mercantile Exchange, below the March 17 close of $43.46. That was the lowest settlement since March 2009. The contract was at $43.62 at 4.04pm Sydney time after falling 6.9 per cent last week. Prices have decreased 18 per cent this year.

Brent for September settlement lost 37 cents, or 0.8 per cent, to $48.24 a barrel on the London-based ICE Futures Europe exchange. Prices declined 6.9 per cent last week. The European benchmark crude traded at a premium of $4.73 to WTI.

Drillers in the US, the world’s biggest oil consumer, have added rigs to fields for the fifth weekly gain in six, Bakers Hughes said on its website. While the number of active machines has climbed to 670, the total count is still down almost 60 per cent since December.

Societe Generale cut its third quarter forecast for WTI by $12.20 a barrel to $47.80 amid stable US production and a surge in output from Opec, analysts including Michael Wittner said in a report last week. JPMorgan reduced its average estimate for WTI in the second half to $44 and its Brent projection to $50.

China’s crude oil imports rose to a record on a monthly basis driven by buying from small, private refineries amid low prices. Overseas purchases increased to 30.71 million metric tons in July, equivalent to about 7.3 million barrels a day, according to preliminary data released by the Beijing-based General Administration of Customs on Saturday.

“The Chinese look to buy on the dip,” Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group in Melbourne, said. “In this market, where the demand conditions aren’t so strong, they’ll be very opportunistic. We’re expecting oil prices not to recover at all in the second half.”


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