Oil futures recovered from the recent slump despite the oversupply concerns as market players expected a downbeat U.S. crude stockpiles data to be announced later today.
Crude oil stockpiles are expected to drop around 900 barrels on average while the gasoline stockpiles are predicted to slide by 300,000 barrels. Also the stocks distillates may decline around 100, 000 barrels by the analysts.
In line with this, the American Petroleum Institute forecasted a decline of 1.3 million barrels of the U.S crude supplies from July 25 to July 29. The distillate stocks are estimated to increase approximately 539,000 and the gasoline stocks to drop by 450,000 barrels-higher than the analysts’ expectations.
Market players agreed that the oversupply in the oil market would still remain despite the forecasted decline of the stocks. Some of the drillers may even comeback to the fields as the U.S. traded oil is predicted to fall around $35 per barrel.
Earlier today, light sweet crude futures for September delivery on the New York Mercantile Exchange changed hands $0.23 higher to $39.74 per barrel while the Brent crude for October delivery on London’s Intercontinental Exchange Futures climbed $0.19 to trade $41.99 per barrel.
ICE gasoil for August delivery increased $1.75 to $359.000 per metric ton while the Nymex reformulated gasoline blendstock for September delivery advanced 25 points to trade $1.3141 per gallon. Also, September diesel changed hands 70 points higher at $1.2660.
Organization of the Petroleum Exporting countries reported an increase of supply from 33.31 million barrels per day in June to 33.41 million barrels per day in July.
Adding to the oversupply sentiment was the highly anticipated come back of productions in Nigeria as well as in Libya. The output of the two countries, which are under supply disruption concerns at the moment, will likely add to the uncontrolled supply upsurge.
Tim Evans, a Citi Futures analyst, said’ Our impression of the overall API figures for last week is that the swings are likely too small to put prices onto a different, more bullish path.”
Meanwhile, oil refineries in Japan, South Korea and China may reduce their respective production to ease off their storage. Gasoline and diesel inventories managed by the locals in China have surged 16.6 percent to 576,000 metric tons in the first two weeks of July. Relatively, the increase of inventories was the outcome of poor demand of the commodity.
The total crude imports in China is expected to decline in the coming months. Song Yen Ling, senior analyst with Platts China Oil Analytics, estimated that from the averaged 7.5 million barrels per day crude imports of China, it might decline to 7.3 million barrels per day. Song explained that When prices are in a downtrend, refiners tend to buy less because they don’t want to be stuck selling products priced at $40 when prices drop to $35.
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