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UPDATE 7-Oil at multi-month lows; hunt for new bottom as gasoline piles up

Published 07/08/2015, 05:08 am
© Reuters.  UPDATE 7-Oil at multi-month lows; hunt for new bottom as gasoline piles up
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* Brent hits 6-month bottom; U.S. crude 4-1/2 month low

* Rising U.S. gasoline stocks signal more price pressure to come

* Prices need to be lower for longer -Goldman Sachs (Adds settlement prices)

By Barani Krishnan

NEW YORK, Aug 6 (Reuters) - Oil set multi-month lows on Thursday as investors and traders sought clues about the market's next bottom after a large drop in U.S. crude inventories failed to boost prices.

A bigger-than-expected build in U.S. gasoline stockpiles last week proved more important to investors than crude storage numbers that came in three times below forecast on Wednesday.

Brent LCOc1 , the global oil benchmark, settled down 7 cents at $49.52 a barrel, after setting a six-month low at $48.88.

U.S. crude CLc1 finished 49 cents lower at $44.66 after touching a 4-1/2 month bottom at $44.20.

"We need to see a capitulation trade, and we have not gotten that yet," said analyst Chris Jarvis of Caprock Risk Management in Frederick, Maryland. "We believe that will come once oil breaks below $40."

Crude futures are a few dollars away from breaking 2015 lows, which are above $40. Brent's bottom for the year is $45.19 while U.S. crude has plumbed $42.03.

"Prices are likely to consolidate or weaken further," said Frankfurt-based Commerzbank (XETRA:CBKG) analyst Carsten Fritsch. "The perception is that oversupply will be there for much longer."

Goldman Sachs (NYSE:GS) analysts said U.S. shale drillers had dramatically reduced the time between committing capital and producing oil, so low prices must be sustained to curtail investments and allow supply-demand rebalancing to occur. ID:nL3N10H2TO

U.S. crude inventories fell by 4.4 million barrels last week, versus forecasts for a 1.5 million drop.

But gasoline stocks overshot, to 811,000 barrels, or 300,000 above expectations. The build came as U.S. refiners processed gasoline and distillates, which include diesel, at record high rates last week, taking advantage of strong refining margins. EIA/S ID:nL1N10G1NN

"If they continue to run at these levels, then we will see massive builds in distillates and gasoline stocks when the peak demand season is over for gasoline," Saxo Bank senior commodity strategist Ole Hansen said.

Refiners could cut runs if margins collapse and as they head into seasonal maintenance, leading to fresh builds in crude inventories.

In global crude, September production across the North Sea's Brent, Forties, Oseberg and Ekofisk grades is expected to be at around 1 million barrels per day, the highest for the year, loading data shows. ID:nL5N10E2FU

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