Oil tumbled, approaching a bear market in New York as U.S. stockpiles increased, adding to a glut.
Inventories rose 2.47 million barrels last week, Energy Information Administration data show, in contrast to the 2.2 million-barrel drop forecast by analysts surveyed by Bloomberg before the report. Supplies climbed as refineries processed crude at a record pace and the nation’s oil output was steady near the highest level in more than 40 years.
West Texas Intermediate oil has dropped almost 20 percent in six weeks, nearing the common definition of a bear market, on signs the global surplus will be prolonged as Iran bids to restore output after its nuclear accord.
“The bears are firmly in control of the narrative,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The rise in inventories was enough to push the market over the edge and break through key support at $50.”
WTI for September delivery fell $1.67, or 3.3 percent, to $49.19 a barrel on the New York Mercantile Exchange, the lowest close since April 2.
Brent for September settlement dropped 91 cents to $56.13 on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $6.84 premium to WTI.
The dollar is up 2.3 percent this month, also putting pressure on commodities as it reduces the appeal of buying assets priced in the U.S. currency. The Bloomberg Commodity Index of 22 raw materials fell as much as 1.1 percent to the lowest since April 2002.
The increase in crude stockpiles left them at 463.9 million barrels, almost 100 million barrels above the five-year seasonal average. Supplies at Cushing, Oklahoma, the delivery point for oil futures traded in New York, rose 813,000 barrels to 57.9 million.
“The oil market has been hit by another whammy,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $128 billion of assets, said by phone. “We’ve got a glut and that’s not going to change until U.S. production finally declines.”
There’s a chance that the downturn in the global oil industry may be more severe than in 1986, when business endured the deepest slump in 45 years, according to Morgan Stanley. OPEC output is responsible for the oversupply that’s weighed on prices, analysts including Martijn Rats and Haythem Rashed said in a report dated Tuesday.