Oil price falls further to hit three-month low
BP profit in the past quarter slides 44 per cent compared to last year
Oil has continued on its downward trajectory as further evidence points to supply pressure building.
Brent crude hit a new multi-month low overnight before rebounding slightly. However, this morning, the slide below $45 a barrel continued and at 10am in London, the international benchmark was around $44.50, its lowest level since 10 May.
Its US counterpart, West Texas Intermediate, was down 0.6 per cent to a shade above $42.80, its lowest level for three months.
The BBC blames supply-related factors for the latest dip. In particular, figures from market intelligence firm Genscape show further increases in US production and a 1.1 million barrel increase in reserves at the primary US delivery hub in Cushing, Oklahoma.
US shale drilling has been picking up since the oil price rebounded from its 13-year nadir in February. Combined with recovering output from the likes of Canada, which saw disruption hit by wildfires earlier this year, this threatens to reinstate a global supply surfeit.
"Crude oil markets have been under pressure as oil supplies have started growing with the resumption of output… in the Canadian oil sands," said EY energy analyst Sanjeev Gupta.
Other reports have suggested a draw down on raw crude reserves overall but a resulting glut in refined products as demand fails to keep pace with processing. There is also a huge supply overhang left over, including record levels stored offshore in tankers.
BP's quarterly results today highlight the effects on some of the world's major blue-chip stocks from the oil price slump.
Profit in the past three months has fallen 44 per cent year on year to $720m (£550m), reports the BBC. Factoring in another £2.5bn after-tax charge related to the Deepwater Horizon oil spill, taking total costs to around £46bn, BP reported a loss of $2.2bn (£1.7bn).
Chief financial officer Brian Gilvary said: "We continue to reset our capital and cost base and are moving steadily towards our aim of rebalancing organic sources and uses of cash by 2017 in a $50-55 per barrel oil price range."
Oil price: 'I just can't see it getting back to $60'
An oversupply in the global oil market is preventing the price from recovering to $60 a barrel and could last for two more years, according to one of the world's largest oil traders.
Ian Taylor, the chief executive of Vitol, told The Times that bullish forecasts for demand were unlikely to be met and that near-record levels of domestic and offshore storage might even grow in the second half of this year as disrupted output recovers.
"There's probably 500 million to 600 million barrels in the system," he said. "We are no longer sure that's going to disappear this year."
Describing the market as "a tad soggier", Taylor said the industry consensus has been that "we slowly but surely move up as the supply cutbacks bite".
But, he added: ''We still think the market overall is unlikely to draw significantly in the second half of the year and may even be slightly building."
He continued: "It’s not going to be a two million [barrels increase in] demand year. We are going to be lucky to be a 1.1-1.2 million year… I just can't see the industry getting back to $60."
The oil price has rallied twice this year to around $50, at which point it has consistently run aground as two years of excess supply, combined with the threat of increased production at higher prices, weighs on sentiment.
Last month's Brexit victory hit prices as the dollar rose against the pound and made the commodity more expensive to overseas buyers.
With the shocked reaction to the referendum now fading, evidence continues to point to a huge volume of oil remaining in stockpiles around the world. Where raw crude oil is being drawn down, it is being processed into a glut of petrol and other refined products that are far in excess of demand.
International oil price benchmark Brent crude is down close to one per cent to $45.25 in early afternoon trading in London today, marking another new two-month low.
One effect of the low price has been a widespread cut to investment by oil majors, which has hit, among other areas, the North Sea sector. As a result of a declining quantity of extractable oil in the region, the industry may never fully recover, Taylor says.
"In my view it's game over for the North Sea. The big boys are not going there because there is nothing large enough left. The smaller companies can't get any capital. You will see a slow but steady decline," he said. "It's hard to see it ever coming back."
Vitol is one of the world's largest global oil traders, dealing in more than 146 million barrels last year and boasting revenues of $168bn (£139bn), making it the ninth largest company in the world.
Oil price hits another two-month low as supply concerns persist
The oil price hit another two-month low overnight and is set for a steep weekly fall as supply concerns continue to weigh on trader sentiment.
International oil price benchmark Brent crude fluctuated sharply overnight, dipping to a two-month low of below $46 a barrel before recovering. This morning in London, it tumbled again to its lowest level since 11 May of $45.83, before rebounding back above $46.
The forecast for the week as a whole, according to the Financial Times, is that the benchmark for oil produced in the North Sea is heading for a fall of below 2.5 per cent.
Triggering this volatility, as well as the sharp drops overnight, is the official inventory data from the US, which show a 2.3 million barrel draw in raw crude oil stocks but a sizeable 700,000 barrels in petrol reserves.
The new figures suggest refineries are making inroads into previously record stockpiles of crude but that insufficient demand for the resulting refined products is leaving a glut.
That this is occurring in the peak summer driving season in the US, when the demand for petrol rises sharply, only adds to the unease. Data from BMI Research says consumption in key Asian markets is also waning.
Phil Davis, a trader at PSW Investments in California, points to the separate 4.2 million-barrel build of "other oils" - alternative products that "refiners typically crank out when there is too much gasoline and distillate supply", Reuters says.
Traders say the outlook for the crude market is that it's more in balance as a result of supply disruption. But there is a bearish sign from Iraq, the second-largest producer in the Opec cartel.
Exports from the south of the country in the first 21 days of July are estimated to have averaged 3.28 million barrels per day, up from 3.18 million last month.
"The narrative of a balanced oil market has so far been an illusion," says UBS oil analyst Giovanni Staunovo. He believes supply might increase in the near term, "while demand growth is set to slow in emerging Asia."
Oil price: 'Market is not sound to sustain a rally'
The oil price waned and waxed yesterday as the latest US inventory data added to the mixed messages over supply and demand in the market.
The report showed raw crude stockpiles fell by 2.3 million barrels last week, the ninth straight draw and above the 2.1 million barrels predicted by analysts.
A two-year glut in global supplies has prompted a prolonged slump in prices, but recent supply disruption has swung the market into at least a temporary supply deficit and boosted trader sentiment.
However, gasoline reserves gained for the second week in three, increasing 900,000 barrels. Analysts had expected stocks to remain flat with the previous week.
A glut of refined products even despite the peak summer driving season in the US suggests that fundamental demand is not where it needs to be to sustain a longer-term oil price recovery.
International benchmark Brent crude hovered near a two-month low at around $46 a barrel ahead of the data release before recovering to a little below $47.50.
This morning in London, it was down to around $47 a barrel, well below the $50 at which it spent much of the spring.
"We continue to see these builds in gasoline which suggest the market is fundamentally not sound to sustain a rally," Tariq Zahir, a trader at Tyche Capital Advisors in New York, told Reuters.
Among the factors helping to ensure oil settled higher was a jump in the pound against the dollar after a positive post-Brexit survey from the Bank of England.
Meanwhile, another report revealed that Saudi Arabia has been burning through its own oil reserves since October as demand reaches a peak in the country.
This adds to the sense of a global market more in balance - but again, says Oilprice.com, increased refinery activity that is not expected to last beyond the summer could be responsible.
"Saudi Arabia is moving out of its peak seasonal demand for crude oil right when global refining margins are under strong pressure, and that is not a good combination," said Olivier Jakob, of oil market researcher Petromatrix.
Oil price vulnerable ahead of US reserves report
After falling on both Monday and Tuesday, the oil price was hovering at a relative low on Wednesday morning as traders digested conflicting data on US reserves.
Seen as a barometer for the market's balance between supply and demand, the stock's recovery in recent months has come on the back of consistent drawdowns on US raw crude oil reserves.
However, a recent softening of the price has coincided with surprise increases in stocks of petrol and other derivative products, despite the peak-demand driving season being in full swing.
Overall, this paints a picture of a market in which refineries are making inroads into record crude stockpiles only to create a glut in refined products.
International benchmark Brent crude fell around one per cent at the beginning of the week and was holding below $47 a barrel in London this morning, around $1 above its recent two-month low.
The slides were as much as anything a result of the continuing fallout of the EU referendum on currency markets and especially the dollar.
The greenback rose against the pound earlier this week, leaving it up more broadly against a basket of global currencies. This in turn makes oil, which is denominated in dollars, expensive for overseas buyers and is seen as negative for demand.
But oil also fell despite a report from the American Petroleum Association yesterday showing a 2.3 million barrel fall in crude oil reserves and an 800,000 barrel increase in gasoline stocks.
Official data from US watchdog the Energy Information Administration is due later today. Any cut in main reserves, Reuters says, will be for the ninth consecutive week.
"Unless crude imports fall totally out of bed, there's ample oil in the tanks, and the headline numbers for crude won't be as bearish as the total numbers," said Kyle Cooper, an oil markets consultant for New York-based broker ION Energy.
Oil price falls as output cuts fail to stem oversupply fears
Oil prices extended their decline on Tuesday as cuts in production and concerns over disruptions from an attempted coup in Turkey failed to impact on the glut in global supplies.
Crude prices fell more than 1 per cent from the previous session, despite an expected drop in US shale production next month of 99,000 barrels per day.
Brent crude slipped 11 cents to $46.85 a barrel after finishing the previous session down 65 cents, or 1.4 per cent.
"It's a knife edge between optimism and pessimism," analyst Ben Le Brun told Reuters, adding that the market was eagerly awaiting US crude stocks data to give an indication on the direction of prices.
Despite it being peak summer driving season, fuel stocks in the US, Europe and Asia are brimming, leading traders to store diesel on tankers at sea amid wilting demand.
With land storage also approaching full capacity, there is little support for any sustained recovery in prices even with output tapering.
North Sea oilfields have been hit particularly hard by the rout, with about 30 per cent of the region's production operating at a loss, Bloomberg reports. The market is also suffering from a lack of investment due to uncertainty created by the UK's decision to leave the European Union.
Meanwhile, China continues to increase its crude imports, with a rise of 14.2 per cent between the January to June period. The gains come mainly from huge increases in supply from Russia, Oman, Iraq and Brazil.