Oil losses continue after falling into bear market

HONG KONG: Oil held losses after tumbling into a bear market as rising global supply offset efforts by the Organisation of the Petroleum Exporting Countries (Opec) and its allies to drain a glut.

August futures were little changed in New York after front-month prices closed on Tuesday more than 20% below their February peak. Libya, exempt from the Opec-led output cuts, is pumping the most in four years while oil stored on tankers reached a 2017 high this month.

US crude inventories dropped by 2.72 million barrels last week, the American Petroleum Institute was said to report.

Oil has extended its decline below US$44 a barrel to a nine-month low on concerns relentless supply gains from the US, as well as renewed output from Libya, is offsetting cuts by Opec and partners including Russia. American drillers have added rigs to fields for 22 weeks, the longest run in 30 years, according to Baker Hughes Inc.

“Sentiment is very bearish,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp in Singapore.

“Supply concerns are the major factor underpinning lower oil prices. Rising Libyan output and the high rig count shows that there could be more upside risk to supplies into the year.”

West Texas Intermediate for August delivery was at US$43.46 a barrel on the New York Mercantile Exchange, down 5 US cents, at 1.51pm in Hong Kong.

Total volume traded was about 33% below the 100-day average. The July contract expired on Tuesday after dropping 97 US cents, or 2.2%, to US$43.23, the lowest close since Sept 16.

Brent for August settlement traded at US$45.91 a barrel, down 11 US cents, on the London-based ICE Futures Europe exchange. The contract lost 89 US cents, or 1.9%, to US$46.02 on Tuesday.

The global benchmark crude traded at a premium of US$2.45 to WTI.

Energy companies led losses among equities in Asia, with the MSCI AC Asia Pacific Energy sub-index dropping 1.3%. China Petroleum and Chemical Corp, known as Sinopec, fell 2.4% and PetroChina Co lost 1.6%, while Australia’s Santos Ltd slipped as much as 3.7%.