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Oil heads for weekly loss as ample US stockpiles sustain glut

Oil prices
Oil prices

Oil is set for a weekly decline as the U.S. heads toward the end of its summer-driving season with ample crude and motor fuel stockpiles.

Futures are down 2.8 percent in New York this week. U.S. crude and gasoline supplies are at the highest seasonal levels in at least two decades, according to data from the Energy Information Administration. Record June motor fuel consumption wasn’t enough to make a dent in inventories that ended the month at the highest since 1984 for this time of year. The summer driving season ends Sept. 5 on Labor Day.

Oil has fluctuated between about $44 and $52 a barrel since early June after almost doubling from a 12-year low in February as supply disruptions from Nigeria to Canada and falling U.S. output trim a global surplus. While American crude stockpiles slid for a record ninth week through July 15, they still remain more than 100 million barrels above the five-year average.

“One of the things the market has to contend with right now is a very, very high level of inventory,” Michael Cohen, an analyst at Barclays Plc, said in a Bloomberg television interview. “It’s very much higher than where we should be at this time of year.”

West Texas Intermediate for September delivery was little changed at $44.67 a barrel on the New York Mercantile Exchange at 10:39 a.m. London time. The contract lost 2.2 percent to close at $44.75 on Thursday. Total volume traded was about 8 percent below the 100-day average. Prices are heading for the second weekly drop in three weeks.

Brent for September settlement was 4 cents higher at $46.24 a barrel on the London-based ICE Futures Europe exchange. The contract fell 97 cents to $46.20 a barrel on Thursday. Prices are down 2.8 percent this week. The global benchmark traded at a premium of $1.61 to WTI.

For a story on how prices are set and where they might be going, click here.

U.S. crude inventories dropped by 2.34 million barrels last week to 519.5 million, the EIA reported Wednesday. Gasoline stockpiles rose to 241 million barrels, the highest level since April, while crude production gained for a second week.

Oil-market news:

U.S. gasoline demand rose 2.7 percent from a year earlier to 9.64 million barrels a day, the American Petroleum Institute reported Thursday. Schlumberger Ltd. reported an unexpected loss for the second quarter and cut more jobs amid the slide in energy prices. Chief Executive Officer Paal Kibsgaard said the worst may be over. Iran is in talks with Mitsui & Co. Ltd. and Total SA as part of its push to attract $60 billion in foreign investment to more than double the country’s capacity to produce petrochemicals over the next decade.

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