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NYMEX Crude $ 46.60 DN $2.3900
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NEWS
Oil futures settled at their lowest level in roughly a week on Tuesday, pressured by a slowdown in U.S. production declines as concerns over the global economy fed concerns about energy demand.
August West Texas Intermediate crude fell $2.39, or 4.9%, to settle at $46.60 a barrel on the New York Mercantile Exchange. August Brent on the ICE Futures exchange in London lost $2.14, or 4.3%, to end at $47.96 a barrel. Both WTI and Brent marked their weakest settlements since June 27. Crude prices charged lower, “egged on by a strengthening dollar,” particularly versus the British pound said Matt Smith, commodity analyst at ClipperData. And “as economic concerns rise again, crude is looking downbeat.” Britain’s decision to leave the European Union, known as Brexit, has cast a cloud of uncertainty over the nation’s economy as well as global financial markets, and discouraged speculators from investing their money in riskier assets such as oil.
On Tuesday, U.S. economic data was also downbeat, with factory orders dropping 1% in May. “The fundamentals of the oil market have been shifting ‘less bullish’ over the last month as the pace of U.S. production declines slowed in June,” said Tyler Richey, co-editor of The 7:00’s Report. “The U.S. is still widely seen as the world’s ‘swing producer’” given the Organization of the Petroleum Exporting Countries’ current “’full-throttle policy,’ so any signs that the trend in production declines is slowing further will be bearish from a supply standpoint over the medium term,” he said.
Colin Cieszynski, chief market strategist at CMC Markets, said resistance for oil prices could emerge in the $50 to $60 range, but the market could see U.S. shale production come back on stream at prices above that, which would upset the supply-and-demand balance that was just starting to come back into line. He said prices aren’t likely to revisit the sub-$30 lows from February, but “a retest of $40 can’t be ruled out.” Oil traders saw price-supportive news from Nigeria on Tuesday, but developments in Libya may point to higher production. Militants in the Niger Delta, known as the Niger Delta Avengers have claimed fresh attacks on Nigeria’s oil infrastructure this morning, just weeks after a reported cease-fire between the government and the group had been reached. But in Libya over the weekend, state energy company National Oil Corporation (NOC) agreed to merge with its rival in eastern Libya.
Still, “while the decision to unify the country’s oil company under a single management structure is a positive development, we may not see a material ramp up in production in the near-term, given that various different factions and militias control various pipelines and oil fields,” said ClipperData’s Smith. Both Nigeria and Libya are members of OPEC. A recent survey conducted by Bloomberg showed that OPEC output rose by 240,000 barrels a day in June to 32.88 million barrels a day.