WTI oil futures dip below $28 ahead of weekly supply report

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Investing.com – Investing.com – West Texas Intermediate oil futures fell again in Europe trade on Thursday, amid speculation weekly supply data due later in the session will show U.S. crude inventories rose at a faster pace than expected last week.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 16:00GMT, or 11:00AM ET, Thursday. The report, which is expected to show a gain of 2.8 million barrels, comes out one day later than usual due to Monday’s public holiday in the U.S.

After markets closed Wednesday, the American Petroleum Institute, an industry group, surprised market participants and said that U.S. oil inventories jumped by 4.6 million barrels in the week ended January 15, compared to expectations for an increase of 2.9 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 63,000 barrels, the API said.

Crude oil for delivery in March on the New York Mercantile Exchange fell to a session low of $27.97 a barrel before recovering slightly to trade at $28.05 by 08:00GMT, or 3:00AM ET, down 30 cents, or 1.04%.

A day earlier, the Nymex March contract fell to $27.56 before bouncing back to close at $28.35, down $1.22, or 4.13%. The February contract, which expired at the end of Wednesday’s trading session, sank $1.91, or 6.7%, to settle at $26.55, the lowest since September 2003.

New York-traded oil futures are down nearly 25% since 2016 began as mounting concerns over the strength of the global economy, especially in China, underlined concerns about how quickly the global glut of crude is set to shrink.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for March delivery shed 25 cents, or 0.92%, to trade at $27.57 a barrel. London-traded Brent prices sank to $27.10 on Wednesday, a level not seen since October 2003.

Brent prices are down almost 26% since the start of the year, as lingering concerns over China’s economic outlook added to the view that a global supply glut may stick around for much longer than anticipated.

Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.

Oversupply issue will be exacerbated further as Iran plans to return to the global oil market after western-imposed sanctions were lifted earlier this month. Analysts say the country could quickly ramp up exports by around 500,000 barrels, fueling fears over increased supplies amid a global supply glut and slowing demand.

Meanwhile, Brent’s discount to the West Texas Intermediate crude contract stood at 40 cents, compared to a gap of 47 cents by close of trade Wednesday.

U.S. crude has been firmer relative to Brent lately, on signs that the U.S. oil market is likely to grow tighter following Congress’ decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russia.

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