15 July 2016, London — Crude futures dipped below $47 a barrel on Friday on concerns that a persistent global glut of crude oil and refined products will impede any price recovery.
Losses were capped by slightly better-than-expected Chinese economic data reflecting government efforts to stabilize growth as well as a drop in Chinese domestic production.
Brent crude futures were down 52 cents at $46.85 a barrel at 0852 GMT. U.S. West Texas Intermediate (WTI) futures were down 50 cents at $45.18 a barrel.
While the price collapse over the past two years has led to a sharp drop in global oil production, stored inventories remain at high levels, particularly for refined products, weighing on a recovery in prices.
U.S. gasoline stocks and European diesel inventories have risen in recent weeks despite entering the peak seasonal summer demand period as refineries continue to pump out at near maximum levels.
“Inventories are high and we are in the withdrawal season. Things could get worse when we enter late August and September when inventories usually build,” said Hamza Khan, head of commodities strategy at Netherlands-based ING Bank, which forecasts Brent to average around $40 a barrel in the third and fourth quarters of 2016.
Industry monitor Genscape reported on Thursday a 171,511-barrel build at the Cushing, Oklahoma, delivery hub for WTI futures during the week to July 12, traders said.
BNP Paribas analysts said in they expected “very little implied global stock change will occur from Q3 2016 until the end of 2017.”
“As such, the inventory overhang built from the start of 2014 will remain largely in place, and thus continues to represent an impediment to any price rally,” BNP said.
Prices partly retraced their losses after China reported economic growth of 6.7 percent in the second quarter from a year earlier, slightly ahead of market expectations.
China’s June refinery throughput was up 3.2 percent from a year earlier at 45.08 million tonnes, or 10.97 million barrels per day (b/d), the highest on a daily basis, data from the National Bureau of Statistics showed on Friday.
At the same time, China’s domestic crude oil production during the first six months of 2016 fell 4.6 percent from a year ago to the lowest level since 2010.
Investors are concerned that a further slowdown and any major fallout from Britain’s recent decision to leave the EU would leave the world even more vulnerable to the risk of a global recession.
*Ron Bousso; Aaron Sheldrick; editing – Jason Neely – Reuters