Crude oil prices slide deeper into bear market
U.S. crude prices Friday notched their longest stretch of daily declines since 1984, falling deeper into a bear market as global supply increased and investors worried that oil demand growth could slow.
Oil lost nearly 1 per cent for the day, sending shivers through stock markets, with the Dow Jones Industrial Average declining just more than 200 points, as the slide in the commodity raised concerns about global economic growth.
“What a difference a month makes,” said Michael Tran, commodity strategist at RBC Capital Markets.
“Market sentiment has shifted from the most bullish tone in years with many calling for $100 only weeks ago, to the weakest investor sentiment since the 2016 price trough.”
Benchmark Brent crude fell below US$70 a barrel for the first time since early April, and was down as much as 20 per cent since reaching four-year highs at the beginning of October.
U.S. West Texas intermediate crude futures fell for the 10th straight day, the longest such streak since July, 1984, according to Refinitiv data. WTI crude fu- tures declined 48 US cents, or 0.8 per cent to end the session at US$60.19 a barrel, after dropping under US$60 a barrel to its lowest in eight months. The U.S. crude contract had hit a low of US$59.26, down US$1.41 and off more than 22 per cent since its peak in October. That put it in “bear market” territory, borrowing a definition used in stock markets.
Western Canada select crude prices – which trade at a discount to global prices because of their heavier grade – were trading at a mere US$17.75.
Demand worries followed forecasts for slower economic growth in 2019, largely due to a U.S.-China trade war.
On Friday, Chinese data showed producer inflation fell for the fourth straight month in October on cooling domestic demand and manufacturing activity. The report sent global stocks into a tailspin.
Oil peaked in early October on concerns that U.S. sanctions on Iran that came into force this week would drain global crude inventories and bring shortages in some regions.
But other big producers have more than compensated for lost Iranian barrels. The United States, Russia and Saudi Arabia are pumping at or near record highs, producing more than 33 million barrels a day (b/d), a third of the world’s oil.
U.S. energy firms added oil rigs for a fourth time in the past five weeks, bringing the total count to 886, the highest level since March, 2015, data showed on Friday.
Also, U.S. sanctions on Iran are unlikely to cut supply as much as expected. Washington has granted exemptions to Iran’s biggest buyers.
A South Korean delegation including oil buyers is expected to head to Iran next week to discuss resuming oil imports after a three-month halt, sources told Reuters.
China National Petroleum Corp said it was still taking oil from Iranian fields in which it has stakes.
Washington has said it wants to force Iranian oil exports down to zero, but Bernstein Energy now expects “Iranian exports will av- erage 1.4 million to 1.5 million [b/d]” during the exemption period, about half the volume in mid-2018.
Inventories in Cushing, Okla., the delivery point for U.S. crude futures, have risen for seven straight weeks. “As OPEC exports continue to rise, inventories continue to build, which is putting downward pressure on oil prices,” Bernstein said. “A slowdown in the global economy remains the key downside risk to oil.”
Still, a return to oil production cuts by OPEC and its allies next year cannot be ruled out, two OPEC sources said this week. A ministerial committee of some OPEC members and allies meets on Sunday in Abu Dhabi.
The Dow Jones Industrial Average fell 201.92 points, or 0.77 per cent, to 25,989.3, the S&P 500 lost 25.82 points, or 0.92 per cent, to 2,781.01 and the Nasdaq Composite dropped 123.98 points, or 1.65 per cent, to 7,406.90.
The Toronto Stock Exchange’s S&P/TSX fell 83.03 points, or 0.54 per cent, to 15,274.44 points. The TSX’s energy group fell 1.67 per cent, while the financials sector slipped 0.41 points, or 0.14 per cent. The TSX is off 5.8 per cent for the year.
Pump jacks operate in Midland, Tex., in August. Oil’s decline is raising concerns about global economic growth.