The market saw a sharp fall in crude prices on Wednesday, with Brent down by $1.33 and WTI down by $1.88. However, the prices quoted by Brent technically seemed to stabilize at $48 a barrel by Thursday. This fall comes after the larger than expected stockpiles of gasoline in the US markets as per data from the Energy Information Administration. The buyer demand, however, remains tepid.
Experts speculate the global glut to prolong due to the surplus supply continuing to prevail in the market. The base level supply-demand remain weak for both Brent and WTI, in spite of the early signs of a cutback in U.S. shale production. To ensure there is still a Contango, long-term deals are not too many in number and this again could cause a further dip in prices. (Contango is a market structure in which prices are higher at later dates than for prompt delivery, making it profitable to store oil.)
Despite the market recovery seen on Thursday, both Brent and WTI continue to trade in the negative territory at $47.68 and $44.22 respectively. The Thursday market shows a 25% closing peak since June. Until Wednesday, it was the second consecutive week when US crude stockpiles continued the downward slump attributed mainly to low imports. However, they remain almost 100 million barrels above the five-year seasonal average. On Thursday, analysts felt the technical profit rise, which still failed to go beyond $50 a barrel. Prediction for next week, is that the crude prices shall remain around Thursday’s level.
With the help of OPEC members, Venezuela seeks to bring some stability in prices of crude, as stated by Venezuelan President Nicolas Maduro. OPEC has pumped above its 30 million barrel quota for the last 15 months.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)
Source: Marine Bunker Exchange