Reposted from Bloomberg
By Jessica Summers
Oil hovered below $50 a barrel as oil demand is seen decreasing with refiners set to begin seasonal maintenance.
Futures slipped as much as 1.4 percent in New York after a 5.1 percent gain last week. Crude demand typically takes a hit when refineries shut down key units involved in processing oil into fuels. As futures hit the $50-a-barrel level, producers accelerate the use of hedges to lock in future profits. Meanwhile, for the third time this month, a hurricane is heading toward the Caribbean.
“We are moving into the autumn period and that typically is a weaker period seasonally for oil demand,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. At the same time, “we have WTI flirting with $50 and $50 is pretty much the magic number which oil producers come in and hedge. The price of WTI is up against a wall, a producer hedge wall, and it’s going to be difficult to overcome that.”
While oil has gained strength this month and peeked above $50 during three sessions, prices have failed to close above that crucial threshold even as members of the Organization of Petroleum Exporting Countries worked to curb a worldwide supply glut. The global cushion of spare production capacity will shrink without further investment in exploration and output, according to the International Energy Agency.
West Texas Intermediate for October delivery declined 38 cents to $49.51 a barrel at 12:06 p.m. on the New York Mercantile Exchange. Total volume traded was about 18 percent below the 100-day average.