US benchmark West Texas Intermediate (WTI) for October delivery, a new contract, lost 49 cents to $40.83 a barrel in late-morning trade, while Brent crude for October tumbled 56 cents to $46.06 a barrel.
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U.S. crude prices extended gains and Brent briefly turned higher on Thursday as the first hurricane of the 2015 Atlantic season sparked concern as the front-month September contract approached expiration.
Oil supplies typically decline in the spring and summer because refiners make more gasoline to meet driving demand in the summer. It hit a low of $45.07 and threatened to break below $45 a barrel for the first time since March 2009.
There were no signs of a scaleback in decades-high US crude production, which rose to 9.348 million barrels a day in the week ending August 14, according to Department of Energy data.
While global production continues to outpace demand by more than 2.0 million barrels per day, weakening demand from China, the world’s second largest oil consumer, is compounding the downward pressure on oil prices. The U.S. pumped crude in July at the fastest pace for the month since at least 1920, the American Petroleum Institute reported Thursday.
Oil has slumped more than 30% since this year’s closing peak in June amid speculation the global surplus will persist.
Marathon Oil Corp. was the biggest loser on the S&P 500 index, suffering a 7.2-percent drop.
Gary Dugan, Chief Investment Officer at the National Bank of Abu Dhabi (NBAD), said there is a risk of US crude falling into the $30s margin and Brent hitting $40 and possibly going further.
Although U.S. producers have gradually ratcheted back production, anxiety about the Chinese economy has started to infect market sentiment outside of Asia, as traders fear that the news signals a slowdown in the growth rate of economies around the world amid a growing global glut of crude, Lipow said. Energy companies have slashed jobs and curtailed drilling activity in response. Those concerns combined once more on Friday as an early economic indicator in China came in at a six-year low.
The Energy Information Administration said there were 456 million barrels in commercial inventories as of Friday.
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Spot prices of Western Canada Select (WCS), a marker for heavy, diluted bitumen from Alberta’s oil sands sank to a 12-year low near $20 per barrel. He said: “Oil would revert to the $50s range sooner rather than later”.
