Oil dips as ongoing glut outweighs strong start to summer driving

Commodities & Futures
© Reuters. An oil pump is seen operating in the Permian Basin near Midland© Reuters. An oil pump is seen operating in the Permian Basin near Midland

By Henning Gloystein

SINGAPORE (Reuters) – A run by U.S. oil prices toward $ 50 a barrel ran out of steam on Tuesday as persistent concerns of oversupply outweighed signs of a strong start to the American summer driving season.

U.S. West Texas Intermediate (WTI) crude futures () climbed above $ 50 per barrel in early trading on Tuesday, but dipped back to $ 49.77 by 0336 GMT, down 3 cents.

“WTI spot (front-month) did attempt a move higher in thin trading, but failed at the $ 50.00 level before slipping back,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

Analysts said the early price boost came from indicators that U.S. summer driving had a strong kick-off.

U.S. demand for transport fuels such as gasoline for cars, diesel for buses and jet fuel for planes tends to rise significantly as families visit friends and relatives or go on vacation during the summer months. The so-called summer driving season officially started on the Memorial Day holiday at the start of this week.

“The start of the U.S. driving season … boosted confidence in the market that stockpiles would start to fall in coming weeks,” ANZ bank said on Tuesday.

The American Automobile Association (AAA) said ahead of Memorial Day that it expected 39.3 million Americans to travel 50 miles (80 km) or more away from home over the Memorial Day weekend, the highest Memorial Day mileage since 2005.

Despite this, traders said that ongoing concerns of oversupply were weighing on prices.

U.S. drillers have added rigs for 19 straight weeks, to 722, highest since April 2015 and the longest run of increases ever, according to energy services firm Baker Hughes (N:).

The ongoing glut was also reflected in global markets, where benchmark Brent crude futures () were at $ 52.09. per barrel, down 20 cents, or 0.4 percent, from their last close.

The main factor for Brent is whether a decision led by the Organization of the Petroleum Exporting Countries (OPEC) to extend a pledge to cut production by around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 will significantly tighten the market to end years of oversupply.

An initial agreement, which has been in place since January, would have expired in June this year, and the production cutback has so far not had the desired effect of substantially drawing down excess inventories.

Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Let’s block ads! (Why?)

Commodities & Futures News

Leave a Reply

Your email address will not be published. Required fields are marked *