Oil at multi-month lows; hunt for new bottom as gasoline piles up

Thu Aug 6, 2015 3:11pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil set multi-month lows on Thursday as investors and traders sought clues about the market's next bottom after a large drop in U.S. crude inventories failed to boost prices.

A bigger-than-expected build in U.S. gasoline stockpiles last week proved more important to investors than crude storage numbers that came in three times below forecast on Wednesday.

Brent LCOc1, the global oil benchmark, settled down 7 cents at $49.52 a barrel, after setting a six-month low at $48.88.

U.S. crude CLc1 finished 49 cents lower at $44.66 after touching a 4-1/2 month bottom at $44.20.

"We need to see a capitulation trade, and we have not gotten that yet," said analyst Chris Jarvis of Caprock Risk Management in Frederick, Maryland. "We believe that will come once oil breaks below $40."

Crude futures are a few dollars away from breaking 2015 lows, which are above $40. Brent's bottom for the year is $45.19 while U.S. crude has plumbed $42.03.

"Prices are likely to consolidate or weaken further," said Frankfurt-based Commerzbank analyst Carsten Fritsch. "The perception is that oversupply will be there for much longer."

Goldman Sachs analysts said U.S. shale drillers had dramatically reduced the time between committing capital and producing oil, so low prices must be sustained to curtail investments and allow supply-demand rebalancing to occur.   Continued...

A customer holds a nozzle to fill up his tank in a gasoline station in Nice December 5, 2014. REUTERS/Eric Gaillard