Crude oil briefly dips below $40 US on supply glut

Crude oil futures briefly traded below $40 US a barrel Tuesday for the first time since April amid continuing oversupply worries.

The New York futures contract for September delivery fell as low as $39.90 US in early morning trading before rebounding later to trade at $40.80 US at 10:15 a.m ET, up 74 cents from Monday’s close.

That mid-morning price represents a tumble of 20 per cent from its recent peak above $50 US a barrel in June.

The most recent inventory figures from the U.S. Energy Information Administration showed that the U.S. added 1.7 million barrels of crude in the week ending July 22 - pushing the commercial crude oil inventory figure to ‘historically high levels’ for this time of year.

The E.I.A. said the 521.1 million barrels in the U.S. stockpile is more than 61 million barrels higher than it was a year ago and more than 150 million barrels above the supply figure two years ago.

The next inventory report from the E.I.A. will come tomorrow.

While the oil industry isn’t happy about the recent slump in the price they get for their products, motorists are reaping the benefits.

A weekly survey of pump prices by The Kent Group says the average price for a litre of regular unleaded gasoline across Canada was $1.024 as of July 26. That`s down more than 16 per cent from a year ago.

But there are predictions that the current level of low oil prices won’t last. Bank of America Merrill Lynch head of commodities research told Bloomberg Television that oil will likely be back above $50 US a barrel towards the end of this year.

Bloomberg also surveyed 20 analysts for their thoughts on where oil prices would be next year. Their median estimate was that oil would average $57 US a barrel in 2017.