Oil futures failed to hang on to an early bounce Tuesday, with the U.S. benchmark finishing below $40 a barrel for the first time since early April as traders await supply data amid continued concern about a global crude glut.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU6, +0.43% rebounded in early action to trade as high as $40.91 a barrel, but turned south ahead of midday. The contract settled with a loss of 55 cents, or 1.4%, at $39.51—its lowest close since April 7.
While oil is often seen leading the equity market, Tuesday’s price action saw the early rebound by oil futures give way as equities lost ground, signaling a loss of investor appetite for risk, said Robert Yawger, director of the futures division at Mizuho Securities.
Monday’s close left the U.S. benchmark down 21.8% from a 52-week high of $51.23 hit in early June. A bear market is defined as a fall of 20% from a recent peak.
The October contract for Brent crude LCOV6, +0.31% on London’s ICE Futures exchange fell 34 cents, or 0.8%, to close at $41.80 a barrel.
For Nymex crude, the fall back below $40 a barrel and then through Monday’s low at $39.82 sparked fresh technical selling, traders said.
On the fundamental side, traders most fear that weekly data from the Energy Information Administration due on Wednesday will repeat last week’s rise in inventories and production, Yawger said. Market participants will also weigh inventory data from the American Petroleum Institute due late Tuesday.
In particular, the concern is that the data will reveal not only a rise in overall U.S. crude inventories, but also a rise in supply at Cushing, Okla., the delivery point for Nymex futures, as well as a further rise in domestic production and in gasoline inventories.
“That’s what happened last week and really put the market under pressure,” he said.
Based on an estimate by analysts surveyed by S&P Global Platts, U.S. crude stockpiles likely fell 1.9 million barrels last week, while gasoline stocks decreased 400,000 barrels.
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