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US Crude Dips to Under $40 with Global Oversupply Worries

August 2, 2016 at 17:31 by Andrew Moran

Oil prices are having a terrible summer this year, and Tuesday’s trading session was not any different. Oil prices fell after investors decided to wait for new oil data as they saw weakness in the equities market. US crude tumbled to under $40 a barrel, while Brent prices continue to slide.

October West Texas Intermediate (WTI) crude declined $0.58, or 1.45%, to $39.48 per barrel at 17:06 GMT on Tuesday on the New York Mercantile Exchange. US crude has not traded this low since April.

October Brent crude also slipped $0.40, or 0.95%, to $41.74 a barrel on London’s ICE Futures Exchange. Brent crude prices are trading close to four-month lows.

It has been six months since oil prices hit 12-year lows. Since February, oil prices have been steadily recovering and even exceeded $50 a barrel in June. For the last month, both crudes have seen their prices gradually fall.

Despite starting off the trading day strong, oil prices pared their gains because traders noticed prices in the equities market dip. Moreover, on the fundamental side, investors are concerned that new weekly data from the Energy Information Administration (EIA) will show an increase in oil production and inventories. The EIA report is scheduled to be released on Wednesday.

Reports suggest that there could potentially be a major oil glut happening in the next several months. If there is an oversupply then this could start to weigh on oil prices.

Last week, new data discovered that US crude stockpiles decreased 1.9 million barrels and gasoline stocks fell 400,000 barrels. There are other factors to consider, too. US oil drilling activities have amplified, Libya is projected to return to normal oil output, and Organization of the Petroleum Exporting Countries (OPEC) members have pledged to increase their production efforts.

Analysts are warning that the world is pretty much oversupplied with oil right now.

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