Oil trades near $40 after retreat into bear market

Bloomberg

Oil traded near $40 a barrel before weekly U.S. government stockpile data and after falling into a bear market on concern the global supply glut will persist.
Futures added 0.4 percent in New York after dropping below $40 on Monday for the first time since April. While crude and gasoline inventories are forecast to have declined, they will remain at the highest seasonal level in at least two decades. Nigeria has resumed payments to former militants as the government seeks a cease-fire after attacks cut output to the lowest since 1989.
Oil has tumbled more than 20 percent from its peak in June, meeting the common definition of a bear market and ending a recovery that saw prices almost double from a 12-year low in February. The supply glut is upsetting industry expectations, with BP Plc, Royal Dutch Shell Plc and Exxon Mobil Corp. reporting second-quarter earnings last week that were worse than estimated.
“Oversupply continues to weigh on the market,” said David Lennox, an analyst at Fat Prophets in Sydney. “We still think the $40 a barrel level is an area where the price will hold because we have seen it bounce off there before.”
West Texas Intermediate for September delivery was at $40.21 a barrel on the New York Mercantile Exchange, up 15 cents, at 7:50 a.m. London time. The contract slid $1.54, or 3.7 percent, to $40.06 on Monday, the lowest close since April 18. Total volume traded was about 39 percent below the 100-day average.
US STOCKPILES
Brent for October settlement added 20 cents to $42.34 a barrel on the London-based ICE Futures Europe exchange. The contract dropped $1.39 to $42.14 a barrel on Monday. The global benchmark traded at a premium of $1.34 to WTI for October.
US crude stockpiles probably dropped by 1.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday. Supplies rose to 521.1 million barrels through July 22, keeping them more than 100 million barrels above the five-year average. Gasoline inventories probably fell by 1 million barrels last week.
Nigeria’s government is trying to engage militants and other stakeholders to establish a cease-fire, Minister of State for Petroleum Resources Emmanuel Kachikwu said in a meeting broadcast on state television. Kuwait’s government approved an increase in prices of gasoline sold locally, becoming the latest oil-rich Arab nation to cut subsidies as lower crude prices squeeze finances.