Oil price drops to three-month low on oversupply fears

29.05.2020 08:19

Oil prices have fallen to a three-month low, hit by rising concerns that a global oversupply of both crude and natural gas will dampen prices.

US oil fell 2.4% to $43.11 (£32.72) a barrel, its lowest level since April, meaning it has now fallen by 12% so far this month.

Brent crude dropped 2.1% to $44.75, its lowest level since 10 May.

Shares in oil and firms also lost ground, with Exxon Mobil shares down 1.8% and Chevron down 2.6%.

"Crude oil markets have been under pressure as oil supplies have started growing with the resumption of output from the capacity lost due to wildfires in the Canadian oil sands," said EY energy analyst Sanjeev Gupta.

Data from market intelligence firm Genscape also suggested US production had increased.

Inventory at the Cushing, Oklahoma delivery base rose by 1.1 million barrels in the week to 22 July.

"Supply continues to return from disruptions, refined products are severely oversupplied, crude demand is falling well short of product demand, and key product demand is decelerating," Morgan Stanley said in a note.

On Friday, data showed the amount of US oil and gas extraction points had increased for the fourth week in a row.

The slump in prices from as high as $115 per barrel in 2014 led many shale oil producers to cut the number of rigs as producing oil was no longer profitable.

But despite a decrease in American crude supplies over the past year, there are still large stocks of gasoline in the country, even as the US hits its summer driving peak.

The value of the dollar which has steadily risen over the past month has also put pressure on crude oil prices.

(BBC)

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