U.S. crude oil fell under $100 on Wednesday putting the contract on course for its steepest monthly slide in nine months, as concerns over weak demand rose while fears over supply shortages in the Middle East and North Africa waned. U.S. crude stockpiles fell more than forecast last week, while gasoline and distillate inventories rose less than expected. OPEC’s oil production rose in July from June, as a fragile recovery in Libyan supply outweighed fighting in Iraq and reduced output from Angola. U.S. crude oil exports reached 288,000 barrels per day in May, the highest levels since April 1999, data from the U.S. Energy Information Administration showed on Wednesday. Crude oil is trading at 99.61 this morning down 67 cents. Brent oil added 20 cents after its steep decline yesterday to trade at 106.27.
Oil prices decline on both sides of the Atlantic with WTI oil prices declining by 0.7 percent and Brent crude oil declining by 0.5 percent on excess supplies in Europe and Asia while U.S. crude followed suit.
The bigger-than-expected draw in U.S. crude stocks prompted a short rally, but both Brent and U.S. crude soon turned negative as concerns lingered about weak demand, excess supplies and mixed economic signals both in the United States and worldwide. The EIA released its weekly inventories report yesterday and US crude oil inventories declined by 3.7 million barrels for the week ending on 25th July 2014. Gasoline stocks rose by 0.365 million barrels whereas distillate inventories rose by 0.789 million barrels for the same time period.
The crisis between Russia and the West continued to keep the market on edge after the European Union and the United States imposed further sanctions against Moscow on Tuesday for its support of pro-Moscow rebels in Ukraine. However, analysts remained dubious on whether the new economic sanctions on Moscow would have any immediate impact on Russian oil exports.
Traders can expect crude prices to trade lower on account of profit booking and trading around the key $100 psychological mark. Ample supplies on one hand and the geo-political tensions between Russia and the West will see crude prices seesawing from positive to negative and vice-versa. Although the inventory report released by the EIA pointed towards healthy demand for crude, prices are taking cues from other factors. Meanwhile, the NFP data due tomorrow would be a key event that investors will watch for further trajectory in crude prices.
U.S. Natural Gas fell 1.1 percent on Wednesday but recovered this morning adding 11 points to climb back to 3.791. Traders are anticipating more downside from weekly data expected to show another big build in stockpiles. The EIA is due to release its Natural Gas inventory report later today and there are wide expectations that U.S. utilities likely added 93 billion cubic feet of natural gas into storage last week, continuing the record pace of injection.
