Crude oil prices slide deeper into bear mar­ket

The Globe and Mail (Prairie Edition) - - REPORT ON BUSINESS - Reuters, with files from The Globe and Mail

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.

NICK OX­FORD/REUTERS

Pump jacks op­er­ate in Mid­land, Tex., in Au­gust. Oil’s de­cline is rais­ing con­cerns about global eco­nomic growth.

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