Oversupply Concerns Causes Oil Prices To Hit A 3 Month Low

Not only does gasoline appear to be constantly weighing on the market, but United States oil prices recently reached a three-month low.

Oil in the United States for delivery in September on the New York Mercantile Exchange reached $42.92 per barrel. 

This was a decrease of .5% or 21 cents.

Oil has come to the lowest it has been since April due to losing six of the seven past sessions. 

Brent oil is the global benchmark. 

It rose .3%, or 15% on ICE Futures Europe, reaching $44.87 per barrel. 

This ends its losing streak over the past three sessions.

The following shows the futures for Brent Crude, Crude Oil, RBOB Gasoline, Natural Gas, and Heating Oil:

Concerns

Oil has been sent into a retreat this month thanks to oversupply concerns. 

This act has caused the five-month rally that resulted in oil reaching over $50 per barrel to end. 

Refiners in the United States have beaten the demand record. 

Supplies are backing up in the United States, according to analysts, partly due to the overwhelmed international markets.

The Drilling productivity report is showing changes in the following regions:

• Eagle Ford
• Bakken
• Utica
• Haynesville
• Permian
• Marcellus
• Niobrara
• Average change is 34

However, drillers in the United States have begun to show signs that they are anticipating increasing production once more in spite of these fears. 
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United States drillers last week added 15 active rigs to their oil fields. 

Last week marked the fourth week in a row for these increases. 

Sweden’s SEB Bank commodities analyst Bjarne Schieldrop stated that this marked a crucial turning point.

Pioneer said back in April that:

• Oil production had grown by 100 thousand barrels per day
• That they expected production to increase 12% this year
• That they expected to add between five and ten drilling rigs when the price of oil reached $50 per barrel and the outlook on the fundamentals of supply and demand was once again positive.

He stated that the rig count resurgence reflected the results of the 2015 oil price rally. 

Schieldrop further stated that analysts had anticipated some delayed reaction to being seen with shale oil returning.  

He said that this was because of the high levels of debt. 

However, he further stated that the data was expressing a different result.

Data

Government data, last week, indicated that the production of shale oil was flat. 

Numerous individuals believe that the rig count growth is a signal that production is about to grow.

Commerzbank in Germany had the same concerns. 

They used data from Genscape and quoted that it has been indicated the United States could see their stocks rise around 1 million barrels in this week alone.

The Wall Street Journal conducted a survey that included as its participants’ analysts, traders, and brokers. 

This study showed that participants are expecting a 1.6-million-barrel drop in the stocks for crude. 

However, it also revealed that these same people predict gasoline and other types of refined fuel to have in increase in their total levels of around 500,000 barrels combined.

This fits in with a pattern showing that the stocks for total petroleum continue to grow even though crude is experiencing slight declines. 

This concept is confusing analysts who had forecasted that the total for these stocks would begin to decline reported Citigroup Inc. analysts.

The following shows oil prices for crude between 1998 and 2012:

This supply of products that continues to grow will eventually begin to back up and cause crude utilization to relax. 

According to traders and analysts, it will also result in stocks for crude to increase.

Clipper Data director of commodity research, Matt Smith, stated that the idea of having an overabundance of the product continues to frighten individuals within the crude compound. 

He further indicated that refineries are looking to slow down some because they have produced an excessive amount of gasoline over the past few months.

It is said this slowdown will:

• Add pressure to the prices for crude oil
• Add to the weakness the demand for crude oil in the United States is experiencing

The following illustrates the forecast released by the American Petroleum Institute:

There could be additional pressure to sell added if inventory levels for oil in the United States sees a major increase. 

This has already caused oil priced to drop in less than a two-month period by over 14%.

Here are some facts about oil prices falling this week:

• They fell below the 100-day moving average
• This caused the sell-off to acquire additional steam
• It fell below the mean of $44.16 on Monday
• It has not reached below the average since April 5.

This decline is essential for technical traders who use price momentum to make their moves and are likely to view it as indicative that prices are going to continue to fall.

The central role that oil has played over the past two years in the financial markets makes this extremely critical now, according to Mobius Risk Group in Houston’s vice president of research and analysis, John Saucer.

Numerous contemplative traders have submerged the market to make the most of the drastic, and often long-term, increases and decreases that have recently become the norm for oil.  

Saucer stated that the massive presence of these traders could potentially cause a huge reaction in prices to occur.

Saucer further indicated that it was a convincing indicator when it fell beneath the average of the 100-moving day mark. 

He said that even when a person does not think that the market is going to decrease much lower below this mark from where it is when it fell it raised the belief that there could be a fall closer to forty bucks for crude.

The futures for gasoline settled at around $1.3452 per gallon, which was a 1.16 cent increase, or .9%. 

This is still 19% away from the high it had for the year in May.

The futures for diesel rose to $1.326 per gallon, which was a .2%, or .32 cents, increase. 

This ended the losing streak it has been on for three sessions. 

These numbers are shown below.