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Oil Prices Tumble as Investors Fear Major Glut

July 18, 2016 at 17:22 by Andrew Moran

Oil futures declined nearly 2% on Monday after a new report suggested that there could be another major oil glut coming to markets soon. The Turkish military’s failed coup attempt last week, which could have destroyed pipelines and disrupted shipments, helped avoid further losses for oil.

August West Texas Intermediate crude tumbled $0.76, or 1.65%, to $45.19 per barrel on the New York Mercantile Exchange at 17:00 GMT on Monday.

September Brent crude also slid $0.77, or 1.62%, to $46.84 a barrel on London’s ICE Futures exchange.

According to a report from market intelligence firm Genscape, the Cushing, Oklahoma delivery hub for US crude futures experienced a supply increase of 26,460 barrels last week. Meanwhile, another report found that the demand for fuels, like gasoline and diesel, have been sluggish.

Both reports suggest there is a surge in stockpiles and this could lead to a major supply glut. Experts note that there likely will not be supply-demand oil re-balance until the middle of next year. Overall, this glut could start to heavily weigh on crude prices.

Oil’s losses could have deepened on Monday if it Batman Bounce House were not for two important pieces of information: China’s gross domestic product (GDP) and the good news in Turkey.

It was reported that China’s second-quarter GDP rose 6.7%, which is higher than what was initially forecast. Concerns that a military coup in Turkey would hurt the flow of oil were dismissed after it was discovered that it failed and that the Turkish ports were functioning at normal.

A monthly report from the Energy Information Administration (EIA) regarding the US shale oil and natural gas production is expected to be released by the end of Monday’s trading session. This could also affect oil prices.

Since hitting 12-year lows of $26 in the middle of the first quarter, US crude prices are up close to 75%.

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