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Singapore - Oil headed toward its worst week in almost a year as the global risk-asset rout further rankled investors already concerned over growing US supply.
Futures traded in New York are on track to post a 7.5% slump this week as everything from equities to currencies tumbled. Adding to the alarm was data that showed US oil production at a new high, and key technical indicators pointing to a further retreat in prices. Now West Texas Intermediate is spiraling toward $60 a barrel, all but erasing this year’s gain.
Oil’s weakness so far this month follows the best start to the year in over a decade, which was largely driven by gains in the US dollar.
Yet fears that American shale production will outweigh efforts by the Organisation of Petroleum Exporting Countries to cut global inventories have been brought back to the forefront of investors’ minds as data show US output now eclipses Saudi Arabia’s.
“The markets are concerned that domestic oil production in the US has continued to rise and put pressure on OPEC to perhaps break its current compliance with its ceiling,” said David Lennox, a commodity analyst at Fat Prophets in Sydney. Following the selloff in equity markets, “there’s a little bit of risk off the table. In the short term, we’ll see oil prices below $60.”
WTI for March delivery fell as much as 79 cents to $60.36 a barrel on the New York Mercantile Exchange before trading at $60.57 at 3:21 pm in Singapore. Prices are on course for their biggest weekly loss since March 10. Total volume traded was about 0.6% above the 100-day average.
Brent for April settlement dropped 44c to $64.37 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $3.98 premium to April WTI.
US production surged to 10.25 million barrels a day last week, according to government data released on Wednesday. With American production set to climb even higher later this year, the Saudi- and Russia-led alliance of other major suppliers will come under renewed pressure to reconsider self-imposed output caps aimed at eroding a glut.
It wasn’t just futures that took a beating this week. Energy shares from Exxon Mobil in the US to PetroChina in Hong Kong tumbled after the Dow Jones Industrial Average recorded its biggest point-loss ever on Monday and plunged more than 1 000 points on Thursday, sparking a flight from risk assets.
Other oil-market news:
• The Cboe/Nymex Oil Volatility Index increased 1.2% on Thursday, gaining more than 26% this week.
• The Bloomberg Dollar Spot Index was 0.2% on Friday after edging higher in the previous two sessions.
• The US is poised to sell half of its emergency oil reserves to help pay its bills, something critics say defies the reason the stockpile was created decades ago as a hedge against supply disruptions.
• Exxon Mobil replaced 183% of last year’s oil and natural gas production with new reserves, the best performance since 2010.
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