Oil prices climbed on news that a tropical storm was approaching the oil producing state of Texas although continued concerns over the commodity’s glut capped the gains.
Light sweet crude for July delivery edged up 53 cents or 0.89% at $60.07 a barrel on the New York Mercantile Exchange.
Brent for August delivery, the new front month contract, slipped 20 cents or 0.31%at $63.70 a barrel on the London based ICE Futures Exchange.
Tropical Storm Bill started off the Gulf of Mexico and is expected to affect drilling operations on most onshore platforms, which pump just about half of the total US output.
“Any reduction in crude oil processing as a result of the tropical storm should really lead to lower oil prices because it means that crude oil stocks increase,” Commerzbank analyst Carsten Fritsch told Reuters.
“On the other hand, it would drive up the prices of oil products as the lower production would result in destocking.”
Also aiding the rally was expectation that a weekly report on crude inventories would show another draw in US stockpiles. Analysts polled by Reuters expect crude inventories to have fallen by 1.8 million barrels in the just ended week.
Traders are still worried however that the global oil glut will continue with analysts expecting Saudi Arabia and Libya to raise output taking the production levels of the Organization of Petroleum Exporting Countries above their quota.
Iran is also expected to raise its production levels by another 500,000 barrels a day after economic sanctions on the country are lifted subject to reaching an agreement over the country’s nuclear program.
“The fact remains that supply is continuing to outstrip demand,” analyst Dominick Chirichella of the Energy Management Institute told Fox Business.
“It is very difficult to see how the massive oversupply situation is going to reverse in the short to medium term.”
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