Crude oil: But the near-term outlook has turned bearish. The rush of refinery runs around the world has created an “epic overhang” of gasoline stockpiles, as Amirta Sen, the top oil analyst at Energy Aspects, described it. And the return of production from Canada, Nigeria, and potentially from Libya could restore some disrupted supply. There has been a lot of uncertainty surrounding the political situation in Europe following the Brexit, but for oil traders, the focus is shifting back to the crude oil market. “When the macro dust settles, which might take a while, it will become apparent that oil fundamentals are weaker than many realized,” Julius Walker, senior consultant at JBC Energy in Vienna, told Bloomberg. The EIA reported another decent though not enormous decline in oil inventories, but a surprising uptick in gasoline stocks spread pessimism around the market.
China adds to refined fuel glut. China stepped up its refining activity to a record high in June, and since domestic demand continues to come in lower than analysts anticipated for China, some of that product is being dumped onto the international market. Refinery runs hit 11 million barrels per day last month, or 3.2 percent higher from a year earlier. The high levels of processing are pushing down refining margins and leading to a flood of refined products being diverted into storage. That is putting strong downward pressure on crude oil prices.
But China’s oil production is falling. China is always viewed as a massive oil importer and consumer, but it is also a sizable producer. Low oil prices are forcing cutbacks at some of China’s high-cost oil fields. China’s production fell 4.6 percent in the first half of the year. PetroChina said that production will decline this year for the first time in 17 years.
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