US crude prices closed in a bear market on Thursday, extending a rout driven by easing concerns of tight global supplies.
Oil prices have tumbled over the past month, with US prices retreating for nine consecutive sessions, amid signs of weaker demand and rising US inventories. The market faced fresh pressure this week after Washington allowed eight countries to continue buying Iranian crude, softening the blow of renewed sanctions.
West Texas Intermediate crude dipped 1.7 per cent to $60.67 a barrel Thursday and fell as low as $60.56 a barrel during the session. The sell-off marked a steep decline compared to a four-year high of around $76 seen in early October. A bear market is defined as a 20 per cent drop from a recent high.
Brent crude was down 1.9 per cent at $70.69 a barrel. The international benchmark is down 18.1 per cent from its four-year high in October.
This is the sixth nine-session losing streak WTI has recorded since 1983, according to Financial Times analysis of Bloomberg data. WTI most recently fell for nine consecutive sessions in July 2014. It has never closed lower for 10 or more days.
Warren Patterson, commodities strategist at ING, said oil prices appeared oversold and he expected an upward correction in the near term, but in 2019 “downward pressure will re-emerge once again.”
The US renewed sanctions on Iran’s energy, banking and shipping industries this week, a move tied to President Donald Trump’s decision to withdraw the US from a nuclear pact. But news that eight nations received temporary waivers forced traders to re-evaluate expectations that the sanctions would throw a wrench into global supplies.
The US Energy Information Administration’s weekly inventory report on Wednesday revealed that domestic crude stockpiles expanded for a seventh consecutive week to 432m barrels, the most since June. The EIA also released a preliminary reading that US production reached 11.6m barrels per day last week, a record high.
America’s oil production is expected to average 10.9m barrels per day in 2018, more than the 10.7m barrels per day the EIA previously forecast. The agency also raised its estimate for 2019 production to 12.1m barrels per day from 11.8m.
Russia and Saudi Arabia, which alongside the US account for the world’s three largest producers, have also ramped up output this year.
As for demand, the Paris-based International Energy Agency cut its global forecast for this year and 2019 in October, citing threats to economic growth.
An Opec committee is set to meet on Sunday in Abu Dhabi, where officials are expected to discuss the market outlook and possibly consider reining in production to lift prices.
“Price weakness has raised the prospect of Opec+ reversing their recent policy of producing as much as they can, to one where they show more restraint,” Mr Patterson wrote. “If any cuts are to be introduced, we believe that they will be much more limited in scope.”
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