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Weekly industry data from the American Petroleum Institute late on July 26 showed that U.S. crude stocks fell by 827,000 barrels in the week to July 22, well short of the 2.3 million barrel draw that had been expected.
Instead of seeing $60 a barrel, which would support an increase in production, the demand questions, and ongoing supply concerns, mean oil could fall further. U.S. crude settled at $43.13 on July 25, after earlier hitting a three-month low.
The Canadian oil and gas earnings season kicked off with signs of an industry recovery as Encana and Precision Drilling outlined plans to boost activity. Analysts said the uptick in optimism might be mirrored by some U.S. shale companies.
The market is concerned that gasoline supply will not clear up in the second half of 2016, causing refinery run cuts and another wave of excess crude, a North Carolina-based trader said.
Pre-downturn sanctioned projects are expected to grow offshore production next year, but the cancellation of pre-FID projects could create a ‘supply crunch’ later, report says.
Crude inventories fell 2.3 MMbbl in the week ending July 15, data from the statistical arm of the Energy Department showed, largely in line with analysts' expectations for a decrease of 2.1 MMbbl.
Oil prices fell on July 18 as traders shrugged off the impact of the attempted coup in Turkey and the market turned its attention to bearish fundamentals, while disruptions to crude exports in Libya lent prices some support.
Brent crude futures were up 45 cents at $47.82 a barrel at 8:00 a.m. CT on July 15, after earlier dropping to $46.65 a barrel. U.S. West Texas Intermediate (WTI) futures were up 42 cents at $46.10 a barrel.
Of the 13 MMbbl/d of new supply that could come from tight oil and conventional projects by 2025, 9 MMbbl/d is commercial at $60 oil, according to an energy consulting firm.
Tamas Varga at London brokerage PVM Oil Associates said the rally in oil was a response to the weaker dollar, but he said the rise could be short-lived.
Oil fell on July 13 after the International Energy Agency warned that a global supply glut threatened a price recovery and data showed an unexpected weekly gain in U.S. crude stocks.
Commercial inventories in industrialized nations rose by 13.5 MMbbl in May to a record high of 3.074 billion, the Paris-based IEA said. Inventories kept building in June, pushing oil in floating storage to its highest levels since 2009.