Crude oil slammed 1.3% as supply-glut fears return
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Crude oil slammed 1.3% as supply-glut fears return
By Sara Sjolin
Published: May 3, 2016 7:02 a.m. ET
EIA inventory data due on Wednesday
Getty Images
Fracking could stir the oil market once again if prices move higher
London (May 3) Oil futures dropped on Tuesday, with renewed fears of a supply glut hitting investor confidence ahead of weekly inventory data that are expected to show an increase in crude supplies.
West Texas Intermediate crude oil CLM6, -0.89% lost 56 cents, or 1.3%, to $44.22 a barrel, while Brent oil LCON6, -0.52% dropped 49 cents, or 1.1%, to $45.34 a barrel.
The declines build on losses from Monday, when crude dropped below $45 a barrel as traders sold some of their positions after a nearly 20% climb in April.
“Oil looks to have topped out, because we’re getting quite near to that level where we might see fracking come out again, so I think people are taking profits on that,” said Augustin Eden, research analyst at Accendo Markets.
The “fracking” technique is primarily used in the U.S. as an effective, but expensive way of extracting oil from dense rock or sand where traditional drilling falls short. After oil prices started to nosedive, fracking producers were some of the hardest hit, because their production costs are higher than for other parts of the oil industry.
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That also means that as oil prices start to rise, fracking could become profitable again, enticing more producers to come back online and increase output in a market that’s already struggling with a supply glut.
The latest data on U.S. output comes on Wednesday when the Energy Information Administration releases its weekly inventory data. A survey compiled by Bloomberg forecast an increase of 500,000 barrels in stockpiles last week.
Reports said on Monday that energy data provider Genscape reported a weekly climb in crude stockpiles of more than 800,000 barrels at Cushing.
Elsewhere in the energy spectrum, gasoline for June RBM6, -1.63% lost 2% to $1.53 a gallon, while natural gas for the same month NGM16, +1.42% jumped 1.2% to $2.07 per million British thermal units.
Source: MarketWatch
