Oil continues slide

Oil continues to slide.

Oil continues to slide.

20 August 2015 – Oil markets opened up weak on Thursday following sharp falls the previous session, with US contracts hovering slightly above $40 per barrel, levels not seen since the credit crunch of 2009, and globally traded Brent tested support at $47.

US West Texas Intermediate crude slumped over 4% on Wednesday to hit a 6.5-year low as a huge unexpected stockpile build in the US reinforced concerns about a growing global oil glut.

US crude inventories rose 2.6 million barrels last week to 456.21 million barrels, the government’s Energy Information Administration said.

And markets opened up weak again on Thursday. US crude futures were trading at $40.69 per barrel in early trade, levels not seen since the peak of the global financial crisis of 2008/2009. Brent was down 11 cents at $47.05 a barrel.

“WTI prices plunged to the lowest level in more than six years after an EIA report showed that U.S. crude stockpiles unexpectedly rose 2.6 million barrels against market expectations for a small decline,” ANZ bank said on Thursday.

“Despite the weak price environment, the biggest Opec producer, Saudi Arabia, boosted its oil exports,” it added.

Saudi Arabia exported 7.365 million barrels per day in June, up from 6.935 million bpd in May, figures published by the Joint Organisations Data Initiative (JODI) showed.

The bearish sentiment is also visible in the long-term derivatives market.

Contracts for delivery of crude in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil for delivery in five years’ time has collapsed in recent months, implying that traders do not expect a price recovery any time soon.

US crude prices for delivery in 2020 cost only about $20 more than they do now, a price difference that falls further when adjusted to expected inflation and interest rates.

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