U.S. oil prices sank into a bear market Thursday as a global
glut of crude shows little sign of abating.
Prices had settled below the key $50-a-barrel mark for the first
time since early April on Wednesday, and they kept falling for most
of Thursday. An unexpected increase in U.S. crude inventories,
announced earlier this week, combined with high production already
coming from the Organization of the Petroleum Exporting Countries,
is raising concerns that the market is settling into a long period
of oversupply.
Light, sweet crude for September delivery settled down 74 cents,
or 1.5%, at $48.45 a barrel on the New York Mercantile Exchange,
the lowest settlement since March 31. The U.S. benchmark has posted
losses in 17 of the past 21 sessions. That skid has now dropped it
into a bear market, down more than 21% from the 2015 high that it
hit just a month ago.
Brent, the global benchmark, fell 86 cents, or 1.5%, to $55.27 a
barrel on ICE Futures Europe. That is Brent's lowest settlement
since April 2.
"We expect the market to remain heavily oversupplied for the
next year, keeping prices subdued," said Thomas Pugh, commodities
analyst at Capital Economics.
Oil prices rose through the spring on expectations that drilling
cutbacks would lead to a decline in U.S. oil production. That
hasn't become a reality, and oil production has indeed risen in
Saudi Arabia, Iraq and elsewhere.
The U.S. Energy Information Administration said Wednesday weekly
oil inventories increased by 2.5 million barrels, while analysts
were expecting a fall. Few things changed Thursday, and brokers and
analysts said a general sense of bearishness is simply
pervasive.
"A lot less rigs being drilled ought to mean production
declines, and that hasn't happened so far," said Rusty Braziel, an
energy consultant.
Consultancy Energy Aspects estimated that global supplies rose
by a substantial 690,000 barrels a day over the month of June,
reaching 95.08 million barrels a day. The biggest share of the
uplift came from OPEC producers, with Saudi Arabia pumping around
10.6 million barrels a day, a record high, Energy Aspects said.
"By expanding its production to a three-year high, OPEC is
ensuring that the oil market remains amply supplied," analysts at
Commerzbank said in a report. "No change can be expected here in
the near future: OPEC delegates made it clear that they view the
weak price as temporary and plan to stick with their strategy of
defending market shares."
Gasoline futures settled down 1.55 cents, or 0.8%, at $1.8521 a
gallon, their lowest settlement since April 14. Diesel futures fell
1.7 cents, or 1%, to $1.6546 a gallon, the lowest settlement since
Jan. 29.
Nicole Friedman and Eric Yep contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com and Georgi Kantchev at
georgi.kantchev@wsj.com
Corrections & Amplifications
Oil prices fell to a three-month low. A previous version of this
story misstated that oil prices fell to a two-month low. (July
23)
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