Oil price heads lower on oversupply worries

All Is Well With Cutbacks, Oil Price Equilibrium is

A line has certainly been drawn between a drill-happy US oil industry and their OPEC-led counterparts, whose oil-dependent economies are craving higher prices. Last week, too, saw a large gasoline build.

West Texas International, or WTI, is the benchmark grade of crude oil produced in the USA and serves as one of the three main pricing barometers of the global petroleum industry.

After hitting over $58 per barrel, Brent crude oil, the global benchmark of the commodity, fell to around $56 p/b at the end of Monday's United States trading session.

Futures lost as much as 1% in NY, after falling 2.4% in the previous two sessions.

Refinery maintenance season is looming large over US facilities but last week these processed crude at an average rate of 16 million bpd, compared with 16.2 million bpd in the week before, producing 9.9 million bpd of gasoline, flat on the previous week. This should help draw down the massive 3 billion barrels of surplus crude oil that now plagues the oil industry.

Advances in USA shale oil production technologies are contributing the to supply surplus and weighing on any oil price gains.


Brent had closed the quarter on Friday up 13 cents per barrel, a gain of approximately 20 percent for the quarter, the biggest gain in five quarters.

With demand outpacing supply, crude and refined products inventories are shrinking.

As for the oil shipment, crude exports hit a record in the week prior with almost 1.5 million barrels sent out daily. Hedge funds are again piling into oil, as are long-term passive investors, attracted not only by rising prices, but also by a profitable change in the forward-price curve . Since oil prices crashed in 2014, West Texas Intermediate has been unable to hold above $50 for more than a few weeks or months.

The rally was driven by mounting signs that a three-year supply glut is easing, helped by a production cut deal among global producers led by the Organisation of the Petroleum Exporting Countries.

"Compliance with the OPEC production cuts was over 100 percent in August (meaning members produced less than their quotas, on average) and US oil inventories have been declining for several months now", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

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