Oil down 2 percent; July to be worst month in a year for U.S. crude

Thu Jul 28, 2016 3:53pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices settled down nearly 2 percent on Thursday, hitting April lows and with U.S. crude headed for its biggest monthly loss in a year, on growing worries that the world was pumping more crude than needed.

Surplus barrels of gasoline already have made the glut developing in oil this year more worrisome to some than the crude oversupply of the past two years that had halved prices. U.S. Gulf Coast gasoline stocks hit record highs last week for the month of July while East Coast inventories reached all-time peaks, government data showed on Wednesday.

Market intelligence firm Genscape added to the bearish sentiment on Thursday, reporting a build of nearly 328,000 barrels at the Cushing, Oklahoma, delivery hub for U.S. crude futures during the week to July 26, traders who saw the data told Reuters.

U.S. crude's West Texas Intermediate (WTI) futures settled down 78 cents, or 1.9 percent, at $41.14 a barrel. WTI earlier fell to $41.04, its lowest since April 20. It also has lost 20 percent since hitting a 2016 high of $51.67 on June 9, technically placing it in bear market territory.

Brent crude futures LCOc1 fell 77 cents, or 1.8 percent, to settle at $42.70, after falling earlier to $42.56, the lowest since April 18.

With just one session to go for July, both benchmarks were poised to end the month down 15 percent. For WTI, that would be the sharpest monthly loss since July 2015, and for Brent, the biggest slide since December.

Oil prices are still up about 60 percent from 12-year lows of $26-$27 in the first quarter. But the rally has faded since they breached $50 in May."Our price target right now is $38 for WTI," said Matthew Tuttle, chief executive of Tuttle Tactical Management in Riverside, Connecticut. "We think there's more to go on the downside because the move that we saw up to $50 was fundamentally driven but that created more supply."

Oil companies have also reported lower earnings lately, hit by weak refining margins.   Continued...

A view of an oil refinery off the coast of Singapore March 14, 2008. REUTERS/Vivek Prakash/File Photo