Oil Prices Slide in Response to Ebbing Supply Disruptions and Resurgent Oversupply

As an increasing number of bearish indicators surface, more pain may be on the horizon for crude oil producers following the price rally that transpired during the first half of the year. Oil prices ticked higher late last week after a coup attempt in Turkey stoked fears of a potential supply disturbance after army forces briefly shuttered the Bosphorus Strait to tanker traffic. On Monday, crude prices retreated more than 1.00% even though the coup failed after there were no reported disruptions to tanker traffic. Turkish President Recep Tayyip Erdogan called the failed coup a “clear crime of treason” and squashed the attempted overthrow in less than 12-hours, sending energy prices tumbling. While crude prices have given back all of Friday’s gains after the news broke, oil is back on the rise ahead of inventory figures due later from the American Petroleum Institute and Wednesday’s official data on US stockpiles from the Energy Information Administration. West Texas Intermediate futures are higher on the session, rebounding to $45.62 per barrel after closing the prior session at $45.23.

Outside of hostilities in Turkey, a major source of oil market anxiety towards prices might the enduring oversupply issues globally. According to the American Petroleum Institute, inventories are ‘filled to the brim’ despite August being a month of higher than average US demand due to increased summer road trips. While US shale production has fallen for nine straight months and August could see the trend continue, Canada and OPEC are making up for the losses by ramping production higher. According to a US drilling productivity report on Monday, production is currently expected to drop by 99,000 barrels per day. However, whether it will be enough to offset production gains in other areas to see price momentum climb is yet to be determined.