Oil ends down more than 2% as US drilling points to glut
US oil prices traded below US$40 a barrel for the first time since the 2009 financial crisis, ending 2 percent lower on August 21 on signs of US oversupply and weak Chinese manufacturing and notching the longest weekly losing streak in almost three decades.
US crude dipped below the US$40 threshold following weekly data that showed US energy firms added two oil drilling rigs last week, the fifth increase in a row. The rise in the number of rigs emerging after a second quarter lull in prices is adding to concerns US shale production is proving slow to respond to falling prices, prolonging a global glut.
"Everyone is still looking at it saying 'Wow, you still don't have production coming down,'" said Tariq Zahir, founder at Tyche Capital in Laurel Hollow, New York.
US October crude settled 87 cents, or 2.1%, lower at US$40.45 a barrel, having touched a new 6-1/2-year low of US$39.86 a barrel. Front-month US crude has fallen 33% over eight consecutive weeks of losses, the longest such losing streak since 1986.
It pared some losses late in the trading session, as US RBOB gasoline futures rebounded from a contract low, on news of a fire in a gasoline-making unit at PBF Energy Inc's 182,000 barrels per day Delaware City, Delaware, refinery.
Brent oil ended US$1.16, or 2.5%, lower at US$45.46 a barrel. It hit a low of US$45.07 and threatened to break below US$45 a barrel for the first time since March 2009.
Energy markets slid early in the day as world stock and currency markets joined an extended rout across raw materials this week, a slump accelerated on Friday by data showing activity in China's factory sector, a huge user of many commodities, shrank at its fastest pace in almost 6-1/2 years in August.
With deepening gloom over demand growth from the world's second-biggest oil user, and expectations for a significant build-up in surplus oil stocks this autumn, dealers said most oil traders were unwilling to fight the tide.
"The market is stuck in a relentless downtrend," said Robin Bieber, a director at London brokerage PVM Oil Associates. "The trend is down - stick with it."
Oil market speculators cut their bullish bets on US crude to the lowest level in five years, reducing combined futures and options positions in New York and London by 14,884 contracts to 89,035 in the week to Aug. 18, the US Commodity Futures Trading Commission said.
The current collapse in oil prices, the second this year, has raised alarm within the Organization of the Petroleum Exporting Countries (OPEC), including some of its core Gulf members. However, there is no indication they will reverse their policy of keeping production wide open to defend market share, delegates told Reuters this week.