Oil price slumps again adding to worries about global glut

Oil prices fell as much as 2% yesterday, with Brent crude oil trading not far from 11-year lows, as data showing fresh supply builds at the delivery point for US crude futures added to worries about a global glut.

Market intelligence firm Genscape reported an inventory increase of 1.4m barrels at the Cushing, Oklahoma delivery hub for the US crude’s West Texas Intermediate (WTI) futures, traders who saw the data said.

“Bearish fundamentals are hanging over the oil markets like storm clouds, with no break in sight or relief in the near future,” said Chris Jarvis, founder of Caprock Risk Management, an oil market consultancy in Maryland.

“The dollar is moving higher too.”

The dollar hit a two-week high against a basket of currencies, making oil and other commodities denominated in the dollar less affordable to users of the euro among others.

The US benchmark WTI was down 68c, or 2%, at $34.84 a barrel at one stage, reaching a session low of $34.76.

On Monday, WTI hit a seven-year low of $34.53.

Brent, the global crude benchmark, was down 20c at $37.19 a barrel, trading less than $1 above its 2004 low.

WTI and Brent declined by about 3% on Wednesday after government data showed a ramp-up in oil supplies across the US last week.

The Federal Reserve interest rate hike, which should support the dollar, added to bearish sentiment in oil.

Speculation about an imminent end to a 40-year ban on US crude exports has caused Brent’s premium to WTI to dwindle to around $1 per barrel.

The premium was above $13 a barrel in March.

The world’s biggest oil producers in Opec added to the bearish sentiment yesterday, forecasting scant chance for a meaningful oil price rise in 2016.

Extra Iranian production was expected to add to the global glut, while voluntary output cuts looked remote, they said.

Goldman Sachs said in a note it would take a steeper market drop to push Opec into co-ordinated production cuts.

“The price action is likely to remain violent, but the odds are on lower numbers,” said PVM Oil Associates technical analyst Robin Bieber.

“Stick with the trend. It is not advised to be long.”