Oil prices drop on fears of bigger U.S. glut

London Jun 15)  Oil prices retreated Wednesday as oversupply worries lingered and the prospect of the U.K. leaving the European Union weighed heavily on investors.

The August contract for global benchmark Brent LCOQ6, -1.24%  was trading down 0.66% at $49.50 a barrel while July deliveries of its U.S. counterpart West Texas Intermediate CLN6, -0.89% was down 0.6% at $48.20 a barrel.

The market has been taking sharp losses since Friday when oil-field services company Baker Hughes Inc. said the number of rigs drilling for oil in the U.S. rose for a second-straight week.

That was exacerbated Tuesday when the American Petroleum Institute, an industry group, said its data showed a 1.2-million-barrel increase in crude supplies for last week.

Official data from the Energy Information Agency will be released later today, with analysts surveyed by The Wall Street Journal expecting the agency to report that U.S. crude stockpiles fell by 2.1 million barrels for that week. If the EIA data confirms the expansion, it would be “a counter-seasonal build in stocks that at least interrupts the prior downtrend,” said Tim Evans, a Citi Futures analyst.

The EIA was also bearish about U.S. shale oil production, predicting it will fall for the seventh consecutive month in July by 118,000 barrels a day to 4.723 million barrels a day.

Meanwhile, central bank meetings this week and the coming U.K. referendum are keeping investors in a wait-and-see mode, said Avtar Sandhu, a commodities analyst at Philip Futures.

“The overall market sentiment is soft because even though production has slowed, supply is still in excess of demand and a rebalance has not yet started,” said Sandhu.

Nymex reformulated gasoline blendstock for July RBN6, -2.14%  — the benchmark gasoline contract — fell 368 points to $1.4845 a gallon, while July diesel traded at $1.4797, 223 points lower.

Source: MarketWatch