Oil futures slid over 2.00% on Tuesday before staging a modest recovery after mystery selling pressure emerged ahead of the American equity market open. While no particular event was credited for the drop, rising production in Libya combined with the prospect of growing distillate inventories in the United States may continue to weigh on prices for the near-term.
US oil output hit a new cycle high last week, echoing the 22-weeks of gains in the drill rig count reported by Baker Hughes last week. As such, the glut could conceivably deepen, especially if demand for refined products fails to experience a pickup. Data from the American Petroleum Institute announced late in the session on Tuesday did show a decline in oil inventories, but nevertheless highlighted the growth in gasoline and distillate stockpiles. Brent futures entered a bear market on Tuesday, with prices erasing earlier gains to trend just above $45.50 per barrel.