By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell more than 2 percent on Monday, with U.S. crude hitting a three-month low, on rising concerns that a global glut of crude and refined products would pressure markets, delaying a long-anticipated rebalance in the market.
Data from market intelligence firm Genscape pointing to an inventory rise of 1.1 million barrels at the Cushing, Oklahoma delivery point for U.S. crude futures in the week to July 22 weighed on crude prices, said traders who saw the numbers.
A massive overhang in refined products, particularly gasoline, despite forecasts for record U.S. summer driving has made investors less optimistic about a quick market rebalancing.
“We’ve got gasoline stocks that are through the roof … And you have the specter of turnaround season not too far in the horizon,” Robert Yawger, senior vice president of energy futures at Mizuho Securities USA said.
He also cut his price target on U.S. crude to $40 from $45 a barrel.
The threat of resurgent U.S. oil production with the rise of drilling rigs and a strong dollar added to the gloomy sentiment in the market, traders and brokers said.
U.S. crude settled down $1.06 at $43.13 a barrel, after touching a three-month low of $42.97 during the session. U.S. gasoline futures tumbled to a low of $1.3291 a gallon during the session, the lowest since March 4.
Brent crude futures ended the session down 97 cents at $44.72 a barrel, after hitting their lowest since May 10 at $44.55.
“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.
The decline in U.S. output has been key to balancing a market that has been grappling with excess crude for nearly two years, but with prices recovering from 12-year lows, signs of drilling activity have re-emerged.
U.S. drillers added oil rigs for a fourth consecutive week, according to last week’s data from a closely followed report by energy services firm Baker Hughes.
But it could be premature to assume it could lead to a rise in production, some analysts said.
“Although drilling activity is now at its highest level since the end of March, it is still 30 percent below the level at which it found itself at the beginning of the year.” Commerzbank analysts said in a note.
Barclays bank said global oil demand in the third quarter was expanding at less than a third of the year-earlier rate, weighed down by anemic economic growth. Demand from developed economies had faded, while growth from China and India had slowed.
(Additional reporting by Ahmad Ghaddar in London, Henning Gloystein in Singapore and Osamu Tsukimori in Tokyo; Editing by M Choy and Diane Craft)