Oil drops to 1-week low on concerns about US oversupply

Oil prices continued to fall as the US market opened on Thursday, to deepen losses for the third straight day and hit a 1-week low, on renewed concerns over the US supply glut, after a record build in the US commercial crude inventories, according to the EIA official data, and a jump in US shale oil production after prices recovered.

The US crude fell 2.3% to $37.16 a barrel, after it opened at $38.04, and hit an intraday high of $38.44, and Brent futures fell 1.8% to $39.50 a barrel, after opening at $40.24, and hit an high of $40.68.

The US crude has lost 4.8% yesterday, and Brent July futures fell 4.9%, posting the largest daily loss in about two weeks on profit-taking from a 15-week high.

The US Energy Information Administration (EIA) showed on Wednesday, that the US crude inventories rose 1.4 million barrels during the week ending June 19, higher than forecasts of 1.2 million, to a total of 540.7 million barrels, the highest level since the start of collecting data in August 1982, and also higher by more than 16% above the 5-year average, in a negative sign on the US demand and consumption.

The EIA also unveiled that US the oil production rose 500,000 bpd, the first weekly increase in the three months, and the largest since the week ending July 26, 2019, to a total of 11.0 million bpd.

During the past two months and a half, the US production fell about 2.6 million bpd, or 20% of its total, due to a suspension in the US production activity due to the falling prices.

With prices improving recently, and with the US producers recouping some of their previous losses, it appears that the drilling activity have begun to recover, which is reflected on the US oil production jump.