Oil loses sight of $50 level amid concerns

LONDON

Global oil prices dropped over the week, losing sight of the key $50 dollar level, as worries about a supply glut and weak economic growth took oil to two-month lows.

Oil enjoyed a modest recovery on July 8 as bargain-hunters swooped in after prices tanked the previous day in response to U.S. commercial inventories falling by less than expected, indicating softer demand in the world’s top oil-consuming economy.

A surprisingly strong jobs report from the U.S. strongly lifted stock markets, but gave oil only a modest boost.

The U.S. benchmark West Texas Intermediate and Brent both gained around one percent on the day, trading at $45.59 and $46.85, respectively, in the late European afternoon on July 8.

This, however, barely made a dent in the week’s decline, which took oil by around six percent lower from its level of over $50 a week ago.

“The lingering oversupply concerns have repeatedly capped most upside gains,” said Lukman Otunuga, an analyst with FXTM, adding that oil may well have further to fall.

“The awful combination of oversupply concerns and fears over a decline in global demand could send oil prices back towards $43,” Otunuga said.

World markets are still grappling with the aftermath of Britain’s EU exit vote and its impact on the world economy. Economic weakness translates into less demand for oil.

Following the shock vote, the dollar rose, making oil more expensive for countries paying in other currencies.