For the second consecutive day US crude prices have dropped below $40 a barrel on growing concerns over global oversupply. A drop in US equities has also offset an early boost for crude prices from a weak US dollar.

US West Texas Intermediate (WTI) plunged as low as $39.42 per barrel on Wednesday - its lowest level since April. The North Sea benchmark Brent crude fell below $42 per barrel in early trading before stabilizing above the mark in the afternoon.

WTI futures fell sharply after the June peak “as traders shrug off expectations of increasing global fuel demand in the coming year and declining North American production levels, while they focus on near glut levels of supply and the end of unplanned supply disruptions (Nigeria, Libya and Canada) of the past couple of months,” Tradition Energy experts commented Monday as quoted by Market Watch.

Concerns about oversupply were heated by a Reuters’ monthly survey which revealed the Organization of the Petroleum Exporting Countries (OPEC) hit the highest recent production level in July.

Crude prices reached highs above $52 per barrel in June as oil supplies contracted due to disruptions in Canada, Nigeria and Libya as well as the faltering economy of OPEC member Venezuela. The short-term recovery faded as soon as higher prices pushed more output of crude and refined products.

Fuel stockpiles are brimming with global refineries producing huge volumes of petrol, diesel and jet fuel. OPEC members are currently pumping near record high levels with Saudi Arabia cutting prices in Asia due to strong competition from Iran over market share.

With a petrol glut hedge funds and traders have cooled towards crude and refined products in the last couple of months.

“With the market continuously focusing on oversupply, this bearish trend seems hard to change in the near term,” said Hans van Cleef, senior energy economist at ABN AMRO Bank as cited by Reuters.

(RT)