Crude oil prices dropped sharply in Asia on Thursday as oversupply in the U.S. and global markets pushed prices down below $41 a barrel and investors sounded increasingly anxious about weak China demand.
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Production in the U.S. averaged 9.4 million barrels in the four weeks ending August. 14, up almost 11 percent from a year ago, according to data released this week by the Energy Department.
West Texas Intermediate crude oil prices fell to fresh six-year lows on Wednesday, dipping briefly below the $41 a barrel mark. “As we go into the next couple of months, crude oil demand is going to decline, which worries the market“, said Andy Lipow, head of Houston consultancy Lipow Oil Associates.
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.
In 2008, during the global financial crisis US crude traded at a low of $30.28 a barrel.
“The report is bearish, with the focus squarely on crude oil and the large increase in overall inventories, due mostly to a surge in imports”, said John Kilduff, partner at Again Capital LLC in New York.
Gasoline futures settled down 2.46 cents, or 1.6%, at $1.5346 a gallon, the lowest level since February.
It noted that the 95 per cent confidence interval for market expectations widens over time, with lower and upper limits of $27 per barrel and $103 per barrel for prices in December 2016.
Asian shares fell on Friday, continuing a global sell-off in equities that hit Wall Street overnight and saw the Dow reach its lowest level this year as concerns about the health of the world economy snowballed.
Crude prices for September delivery scaled a high of USD42.68 a barrel intraday and a low of USD40.46. The European benchmark crude closed at a $5.89 premium to October WTI. In the latest sign of Saudi Arabia’s attempt to secure market share, Egypt said on Thursday it agreed a $1.4 billion three-month oil products deal with state-owned Saudi Aramco to begin in September.
The current collapse in oil prices, the second this year, has raised alarm within the Organisation of the Petroleum Exporting Countries (OPEC), including some of its core Gulf members.
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“Global equities are a negative price driver for the oil and broader commodity complex”, Dominick Chirichella, senior partner at Energy Management in New York said in a note.
