Oil traders short the market as USA crude inventories swell

The US government will issue official inventory data on Wednesday.

Somewhere else, on the ICE Futures Exchange in London, delivery of Brent oil for October edged down 18 cents, or 0.42 percent, to $42.92 a barrel, after increasing $1.30, or 3.11 percent on Wednesday.

Figures from a recent inventory of the U.S. Energy Information Administration indicated that the United States added 1.7 million barrels of crude oil in the third week of July which represent an unprecedented level of inventory figure for this early in the year.

Oil marketer SOMO said that crude oil production in Iraq last month increased to the highest level since January last month to 4.632 million barrels per day.

Oil prices returned to their downward course on Monday, as extended declines in prices darkened the mood among investors.

Futures gave up earlier gains in Wednesday's afternoon session as traders waited for official data on USA commercial crude inventories from the Department of Energy (DoE).

The price for Brent crude oil moved up 0.5 percent to start the day in NY at $42.04 per barrel.

Oil increased after US gasoline stockpiles fell the most since April as refineries increased operating rates.

U.S. crude had dropped below the USD 40 dollar mark for the first time since April on Monday.

West Texas Intermediate for September delivery traded as high as $40.91 a barrel on the New York Mercantile Exchange in morning trading on Tuesday.

In a sign of glutted markets, Singapore's light distillates stocks are around 15 million barrels, up from 13 million barrels in late June, and close to record levels. He said in an interview on Bloomberg yesterday that he expects oil prices to rebound to $50 per barrel later this year.

"Our long standing WTI-Brent targets of $37-38 remain as high probability and position type shorts represent a hold", said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Demand for Crude is also set to fall in the next few months.

"We see resistance in oil prices at $40 per barrel as the global overproduction of oil is declining", it said.

On Monday, US crude had dipped below $40 for the first time since April, weighed down by oversupply, weak demand and expectations of rising output.

  • Wendy Palmer