Oil prices drop with global glut worries in the background

Crude prices turned lower on Thursday, as the recent strong build in U.S. oil product inventories and planned resumption of oil exports by Libya and Nigeria weighed on the market.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV6, -0.30% traded at $43.39 a barrel, down 0.4%. November Brent crude LCOX6, -0.07% on London’s ICE Futures exchange fell 0.3%, to $45.73 a barrel.

Overnight, oil prices dropped about 3% after the U.S. Energy Information Administration data showed total supplies of crude oil and refined products grew by six million barrels in the week ended Sept. 9 to 1.4 billion barrels, near the record high reached a few weeks ago.

“That was a pretty negative report,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.

Oil prices have wavered between $40 and $50 a barrel for months on continued uncertainty about how long the global glut of crude is set to persist. Production from the Organization of the Petroleum Exporting Countries remains high and inventories in the U.S. and elsewhere are near record levels.

Adding to the bearishness is the expected return of exports by Libya and Nigeria, whose oil sales were stifled in recent months due to a string of attacks by insurgent groups. An increase in exports by these two countries would be a major oil-market development ahead of talks in Algeria at the end of this month among OPEC members to cap output.

On Wednesday, officials in Tripoli announced they plan to load the first crude-oil cargo in nearly two years from a major port, Ras Lanuf.

“Our updated base case scenario has overall OPEC production steady at 33.3 million barrels a day, but without assuming a recovery in Libya and Nigeria that could put another million barrels per day on the market in the months ahead,” said Tim Evans, a Citi Futures analyst in a note.

“We’re not sure other producers are prepared to offset that much of an increase.”

Nymex reformulated gasoline blendstock for October RBV6, +0.07% — the benchmark gasoline contract — was almost flat at $1.36.

Source: MarketWatch