US. Oil prices dropped for a ninth consecutive session and reached an eight-month low on Thursday, entering a bear market amid concerns about rising global production and signs of slowing demand.
Light, sweet crude for the December issue ended at $ 60.67 a $ 1.6% barrel on the New York Mercantile Exchange, putting the front month contract 21% below its recent high. The Brent crude oil fell 2% to $ 70.65 a barrel, about 18% below its high. Bear markets are generally defined as a 20% decline versus a market peak.
Darley Shen / Reuters
The US benchmark had risen to just over four months on October 3, just over a month ago at $ 76.41 a barrel. Since then, however, it has fallen sharply due to rising production, which mitigates sanctions on US oil sanctions against Iran and trade tensions that are causing concern over slower global economic growth, which in turn could reduce demand for oil.
The sale of oil over the last two days has intensified after a report by the Energy Information Administration (US Energy Information Agency) showed that oil stocks in the US have risen by seven weeks to a five-month high of 432 million barrels. The report also showed that oil production in the US rose to a record 11.6 million barrels a day, mainly due to production in shale regions such as West Texas and North Dakota.
"Crude oil construction certainly did not help prices," Mark Wagoner told Excel Futures. "But behind those numbers, and as many ordinary people do not know – but oil traders certainly do – the US was the world's largest oil producer a few weeks ago, barely squeaked by Russia. That's huge.
A Trump government's decision last week to issue waivers or exemptions from the oil sanctions against Iran intensified pressure on oil prices. The US allowed eight countries to continue buying Iranian crude oil. This essentially ended all fears of a supply shortage created by the sanctions.
"Even before a larger number of sanctions sanctions were announced on Friday, market sentiment on crude oil had tarnished," Energy Aspects analysts said in a research note. "Against the background of economic uncertainties due to US-China trade tensions, long positions" or investors who bet on higher prices, "they have given up."
Hedge funds and other speculative investors have broken away with bullish oil competitions. Bullish bets on US crude outperformed bearish bets 4: 1 by 30 October, which is well below the 26: 1 ratio in early July according to the Commodity Futures Trading Commission.
Further price declines this week increase the importance of a meeting in Abu Dhabi on Sunday among members of the Organization of Petroleum Exporting Countries, as many assume the group will consider production cuts to boost global oil prices.
"In the face of the recent price collapse and the looming oversupply next year, OPEC wants to restrict oil production"
Analysts said in a note.
Russia has been pumping more oil with the Saudi Arabia-led OPEC nations since the summer to offset the loss of Iranian barrels, which is likely to be lower than expected due to waivers granted to some buyers.
Falling crude oil prices also reflect a weaker demand forecast.
The International Monetary Fund lowered its targets for global economic growth in 2019, citing the trade dispute between the US and China as a factor in the forecast cutback. About a week later, the International Energy Agency lowered its forecasts for oil demand growth for this and next year. The IEA called the higher oil prices as a decision factor.
For refinery products, December intake fuel inventories fell 0.2% to $ 1.6443 per gallon. Diesel futures fell 3.1% to $ 2.6883 per gallon.
Corrections and Reinforcements
An earlier version of this story had misspelled the name of Excel Futures and said that diesel prices were rising. Diesel fell on Thursday. (November 9)
Write to Dan Molinski at Dan.Molinski@wsj.com