Crude Oil Slumps as Demand Overshadows Supply

• Matt Smith predicts again


• Oil Storages are reportedly brimming with supplies

Crude oil has returned under $40 per barrel after its worst month in this year. The US grade of crude oil used to benchmark oil prices, the West Texas Intermediate crude oil futures fell by 16% in July, as the inventories remain unreasonably high. WTI is now 3.97% lower at $39.95 per barrel, this is its least level since the middle of April.

Supply problems in Nigeria and Canada helped prices climb above $50 per barrel in June, but the price of crude has dropped significantly since then, surrounded by more proof that non-US output and US inventories continue to grow.

“Oil demand remains weak this summer; a period when inventories usually fall. This and macroeconomic uncertainty, means the imbalance between demand and supply is likely to persist for a while longer”, this was stated in a note by Barclays on Monday.

On the other hand, the most significant stock market indexes are widely unaffected as August begins, even with the S&P 500 currently trading above its usual intraday peak of 2,177.09.

Matt Smith of ClipperData, the same person who forecasted back in June that prices would slump to $40 per barrel believes again that crude will likely drop lower in the near future. Smith gave his first prognosis in June on the trail of crude oil rising above $50 this year, Crude ended up shedding as much as 20% from that high last week.

"I see it going lower from here. We have this glut here in the U.S. not only in crude but for products, as well. We're actually at record inventories for the two of those." Smith told CNBC's "Squawk Box"

The fall of crude prices have in the past few weeks been intensified by an over-supply of refined crude products, this glut became more evident when there was a slump in parallel demand of the products especially gasoline. Already high stockpiles of these refined products rose further when the demand for the product became significantly less than it should be to consume all the gasoline that had been refined to compensate for low prices.

The declined demand for crude is mostly as a result of the market reacting to the reported record high stockpiles of gasoline, as the US summer driving season comes to a close, and refiners are set to shut down their facilities for maintenance this fall. The national average for a gallon of gasoline is not spared as it is currently pined at $2.13 against its $2.66 at around this in the year 2015.

The problem is also being further complicated by China, the country is reportedly approaching storage limits, and Smith thinks this will result in a decline in the demand for crude in China. He also said that gasoline cargos currently at sea have be redirected from the New York harbour as onshore facilities are too full to receive deliveries, also in Singapore floating storage ships are almost at record high.

"Essentially, Singapore is this parking lot, and a lot of those crude cargoes do not have buyers," he said.