Oil sinks into bear market as US storage jumps most since 1990
US crude production set a record, while imports climbed.
West Texas Intermediate crude entered a bear market and Brent tumbled below $60 after US petroleum inventories ballooned, raising fears of a glut as trade disputes threaten demand.
US crude settled 22 percent lower than its April peak after tumbling as much as 5.4 per cent. Brent sank to the lowest since January. US government data showed America’s total petroleum stockpiles grew by about 22 million barrels last week, the biggest jump in data going back to 1990. US crude production also set a record, while imports climbed.
“I wouldn’t be surprised to see a real meltdown in the prices today,’’ Matt Sallee, a portfolio manager at Tortoise Capital Advisors LLC, said by phone. ‘‘Until something changes the mood, which maybe would be a breakthrough in trade, I don’t see any reason crude is going to improve over the next week.’’
US West Texas Intermediate futures for July fell $1.80, or 3.4 per cent, to settle at $51.68 a barrel on the New York Mercantile Exchange. Brent for August settlement fell $1.34 a barrel, or 2.2 per cent, to settle at $60.63 in New York.
Both grades have reversed after touching yearly highs six weeks ago. A breakdown in trade talks between the US and China and threats of new American tariffs against Mexico have stoked fears about a world economy that’s already showing signs of weakness.
Still, the price drop has also raised the chances that the Organization of Petroleum Exporting Countries and its partners will extend production curbs past a June deadline. OPEC Secretary-General Mohammad Barkindo told an investment conference in New York Wednesday that the group will take the current “ economic bearishness” into account when it meets in coming weeks.
“We could be looking at crude going down and testing some of the support levels" of the January lows, Marshall Steeves, energy markets analyst at Informa Economics in New York, said in an interview. A drop below $50 for WTI could trigger automatic selling programs that would accelerate the decline further, he said.
“It’s the perfect storm, in a way, of increased supply coupled with perceptions of slowing demand growth," Steeves said.
Other oil-market news:
Gasoline futures declined 1.8 per cent to $1.6928 a gallon. Russia is shipping more oil from its main Baltic and Black Sea ports as the nation tries to lessen the impact of contamination in its key export pipeline to Europe. Given the rout in crude prices, Saudi Arabia may now need to cut even deeper, according to Helima Croft, chief commodities strategist at RBC Capital Markets.