Oil Sinks Into Bear Market as U.S. Storage Jumps Most Since 1990
(Bloomberg) -- West Texas Intermediate crude entered a bear market and Brent tumbled below $60 after U.S. petroleum inventories ballooned, raising fears of a glut as trade disputes threaten demand.
U.S. crude settled 22 percent lower than its April peak after tumbling as much as 5.4%. Brent sank to the lowest since January. U.S. 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. U.S. 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.’’
U.S. West Texas Intermediate futures for July fell $1.80, or 3.4%, 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%, 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 U.S. and China and threats of new American tariffs against Mexico have stoked fears about a world economy that’s already showing signs of weakness.
See also: EIA Imports Boom Drives Biggest Stockpile Gain in 30 Years
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.
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