U.S. crude falls to near 6-week lows, as supply glut weighs
Investing.com — U.S. crude futures fell mildly on Monday to a fresh six-week low, amid a downbeat forecast on 2016 prices by an influential analyst and indications of a spike in imports as production continues to wane.
On the New York Mercantile Exchange, WTI crude for December delivery traded between $43.86 and $44.93 a barrel before settling at 44.19, down 0.57 or 1.23% on the session. After surging above $50 a barrel in mid-October, Texas Long Sweet futures have now closed lower in nine of the last 13 sessions. At one point on Monday, U.S. crude futures dropped to its lowest level since Sept. 14.
On the Intercontinental Exchange (ICE), brent crude for December delivery wavered between $47.42 and $48.32 a barrel before closing at 47.59, down 0.39 or 0.81% on the day. Meanwhile, the spread between the international and U.S. domestic benchmark of crude stood at 3.40, slightly above Friday’s level of 3.39 at the close of trading.
In a note to investors, prominent Wall Street bank Goldman Sachs (N:GS) remarked that distillate storage in the U.S. and Europe is nearing historically high levels, amid “record refinery utilization, only modest demand growth (especially relative to gasoline), and increased imports from the East on refinery expansion and Chinese exports.” As a result, Goldman warned investors of comparable downturns in 1998 and 2009, when distillate storage reached overall capacity, pushing crude prices considerably lower.
Elsewhere, investors digested bearish import data from the U.S. Energy Information Administration, which showed that imports of light crude oil nearly doubled from 5.6% of total imports in April to 11% in July. For a five-year period between 2010 and 2014, U.S. crude imports declined roughly 20% from a peak of 9.2 million barrels per day. Last week, though, imports surged by 156,000 bpd for the week, as crude production nationwide continues to level off. Crude output remains below 9.1 million bpd, significantly below its level of 9.6 million bpd in April, when it eclipsed a 40-year high.
As production has slowed, U.S. refineries have increasingly turned to exporters from smaller nation such as Nigeria, which can provide light crude at lower relative prices. Over the last year, crude prices worldwide have come under pressure from a glut of supply on global energy markets after OPEC triggered a protracted battle with U.S. shale producers with its decision to leave its production ceiling above 30 million barrels per day.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, dipped more than 0.25% to an intraday low of 96.83. It came amid the release of weak manufacturing data and reports that new home sales in September slumped to their lowest level since last November.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.