LONDON—Oil prices kicked off the week in the red and traded near
multi-month lows on Monday, in response to widening concerns over
excess supply and weak demand.
Over the weekend, China released disappointing economic data,
clouding the demand outlook for the world's second-biggest oil
consumer. Meanwhile, the number of oil drilling rigs in the U.S.
rose last week, underscoring concerns that the supply glut is
unlikely to abate soon.
"The prospect that crude oil prices will retest the lows hit
earlier in the year has caught the market off guard," said David
Hufton at brokerage PVM. "Sadly there is no relief in sight and the
technical knives are out, with the years lows well within
range."
Brent crude, the global oil benchmark, fell 0.3% to $48.50 a
barrel on London's ICE Futures exchange. On the New York Mercantile
Exchange, West Texas Intermediate futures were trading down 0.3% at
$43.76 a barrel. The contract lost about 7% last week and fell
within less than a dollar from its March lows.
The Chinese government said producer prices hit their lowest
level since 2009, while exports slid 8.3% from a year earlier.
However, China's crude oil imports year-to-date are up 10.4% at 194
million tons, one of the few bright spots in the data released over
the weekend.
Separately, oil-field services firm Baker Hughes Inc. said
Friday the number of rigs drilling for oil in the U.S. rose for the
third straight week.
The rig count, which is a rough proxy for activity in the
industry, is still down about 58% since a peak of 1,609 in October,
but the recent increases add to fears that persistently high U.S.
production would continue to add to the global glut of oil.
"The May/June period, when WTI was trading at around $60 a
barrel, triggered renewed drilling interest which is coming through
now,"Mr. Hufton said.
According to DNB Markets, it will be hard for oil prices to rise
back above $70 a barrel for some time as costs to extract oil are
falling and global supply looks set to outpace demand for longer.
The bank revised its Brent price forecast for the second half of
the year to $58 a barrel from $74 a barrel.
"We are also struggling to find enough bullish arguments to
maintain $75 a barrel as our price assumption for 2016 and $80 a
barrel for 2017," the bank said in a report.
Nymex reformulated gasoline blendstock—the benchmark gasoline
contract—rose 1.1% to $1.64 a gallon. ICE gas oil changed hands at
$473 a metric ton, up $3.25 from the previous settlement.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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