Oil on Tuesday marked its lowest finish since August, with prices sinking into bear-market territory as investors remained concerned that rising output from the U.S. and Libya will offset OPEC-led production cuts reports MarketWatch. Meanwhile, natural-gas prices got a modest boost as traders eye two tropical storms that have formed in the Atlantic.
July West Texas Intermediate crude declined by 97 cents, or 2.2%, to settle at $43.23 a barrel on the New York Mercantile Exchange on the contract’s expiration day. That was the lowest front-month contract finish since Sept. 16, according to data from Dow Jones. Prices also ended down 20.6% from 2017’s year-to-date high above $54—putting them in bear-market territory.
Crude’s last drop into bear-market territory “actually signaled a bottom” for prices, said Phil Flynn, senior market analyst at Price Futures Group. “The bears are driving us lower and if they keep it up, they will drive shale producers into retreat.”
August crude which became the front-month contract at the settlement, lost 92 cents, or 2.1% to $43.51 a barrel.
Brent crude for August delivery on London’s ICE Futures exchange slid 89 cents, or 1.9%, to $46.02 a barrel. Prices ended at their lowest since mid November.
WTI saw “capitulation” ahead of the July contract’s expiration, with supply-glut fears being fed by expectations of higher Libyan production, said Flynn. Libya, which is exempt from the output-cut accord led by the Organisation of the Petroleum Exporting Countries, has ramped up production to 900,000 barrels a day, adding further pressure on the market that is awash with surplus.
Additionally, concerns about higher U.S. output kept prices under pressure. Various energy-monitoring bodies, such as the International Energy Agency, of late have projected U.S. crude output will continue rising through next year—-increases which stand to negate the bulk of the continuing OPEC-led cuts. Weekly U.S. supply data from the American Petroleum Institute are out later on Tuesday, with the much-anticipated Energy Information Administration inventory report due Wednesday. Analysts surveyed by S&P Global Platts expect the EIA data to show that oil inventories fell two million barrels last week.
The OPEC-led agreement that went into effect on Jan. 1 has so far failed to cut global production down to five-year averages. Morgan Stanley pointed out that identifiable oil inventories—both oil and products in the Organisation for €Economic Cooperation and Development, China and selected other non-OECD countries—increased some at a rate of around 1 million barrels a day in the first quarter.
In other energy products, Nymex July gasoline fell 2.7 cents, or 1.8%, to $1.424 a gallon and July heating oil lost 1.6 cents, or 1.2%, to $1.395 a gallon. Natural gas for July tacked on 1.3 cents, or 0.5%, to end at $2.907 per million British thermal units. Prices dropped nearly 5% Monday to their lowest since early March as cooler weather forecasts dulled demand expectations.
