Oil heads for biggest monthly loss in a year amid inventory glut

Futures dropped as much as 1 percent as trading opened in NY.

New reports from the U.S. Energy Information Administration this morning revealed that domestic crude supplies rose by 1.7 million barrels for the week ending July 22.

Recent supply stoppages, triggered by factors including the wildfires in Canada, attacks on Nigerian oil pipelines and the steady decline in United States production, has many hopefuls predicting the market balance to shift towards demand.

Exxon is the latest in a string of oil majors to report declining earnings or losses for the second quarter, due to weak refining activity and persistently low crude oil prices.

Analysts say global supplies are rising just as demand has dwindled.

Oil prices are being driven by movements in the dollar as market conditions don’t suggest any particular direction, Jeff Currie, head of commodities research at Goldman Sachs Group Inc. said in an interview with Bloomberg television. The contract dropped 0.5 percent to $42.92 on Tuesday, the lowest close since April 25. Gasoline consumption averaged about 9.8 million barrels per day, up 2.6 percent from a year ago.

Nymex reformulated gasoline blendstock for August NGQ16, -1.18% – the benchmark gasoline contract – rose 86 points to $1.3300 a gallon, while August diesel traded at $1.3024, 74 points higher.

“Right now, the only thing that would drive prices higher is robust demand”, said John Paisie, executive vice president at Stratas Energy Advisors, a Houston-based consultancy. Supply continues to exceed demand, resulting in a negative price outlook in the short term. Gasoline stocks rose by 452,000, dwarfing forecasts for a 40,000 barrel increase. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October.

It was the sixth such increase over the past 10 months, according to the EIA. U.S. drivers logged two percent more miles in May than a year earlier, compared with 2.2 percent in April, according to the U.S. Department of Transportation.

“There is too much oil in the market, there’s an incredible amount”, said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney.