Oil tumbled, capping a sixth week of losses, on speculation that the return of drilling rigs in the U.S. and Iranian shipments will prolong the global supply glut.
Futures fell 1.8 percent in New York, bringing the weekly loss to 6.9 percent. The drop accelerated after Baker Hughes Inc. reported Friday that the number of active rigs in the U.S. rose for the fifth time in six weeks. Iran is seeking to regain market share by boosting supply after last month’s nuclear agreement with world powers.
West Texas Intermediate and Brent crudes have tumbled as OPEC’s largest members have sustained record output while U.S. inventories remain about 100 million barrels above the five-year seasonal average. U.S. crude output climbed the most in two months last week, government data showed Wednesday.
“The market is taking its cue from the fundamentals, which are very weak,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “There’s an increasing recognition that we’re still in a market where global supply outstrips demand.”
West Texas Intermediate for September delivery fell 79 cents to close at $43.87 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 17 and the second-lowest of 2015. Total volume was 13 percent above the 100-day average at 2:43 p.m. Futures are down 18 percent this year.
Brent for September settlement declined 91 cents, or 1.8 percent, to end the session at $48.61 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since Jan. 28. The European benchmark oil also fell 6.9 percent this week, the most since March. Brent closed at a $4.74 premium to WTI.
“We’re back at the March bottom,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “There are always a few knife catchers but I wouldn’t stand in the way of this. It looks like we’ll soon be trading in the $30s.”
Rigs targeting oil in the U.S. rose by six to 670 this week, Baker Hughes said on its website Friday. U.S. oil production has been resilient as America’s oil drillers have sidelined more than half the country’s rigs since October.
Iran is seeking to produce almost 4 million barrels a day within seven months of sanctions being removed, expanding to 4.7 million as soon as feasible after that, Oil Minister Bijan Namdar Zanganeh said last month.
Senator Chuck Schumer, a New York Democrat, said he will oppose the Iran deal. Congress has until Sept. 17 to review the accord. If lawmakers pass a resolution of disapproval, the likely outcome in the Republican-led House and Senate, President Barack Obama has said he will veto it.
Crude output expanded by 52,000 barrels a day to 9.47 million in the seven days ended July 31, the first gain in four weeks, according to the Energy Information Administration.
Current oil prices are unsustainable and the market will rebalance in the next six to 12 months as U.S. output declines, UBS Group AG said in a note.
“Oil production in key shale plays in the U.S. is already declining,” the bank said. “This decline will become more visible and a more powerful drag on overall U.S. production in coming quarters.”
A technical indicator shows prices have probably dropped too quickly to sustain further losses. WTI’s 14-day relative strength index is about 23, below 30 for the sixth straight day, data compiled by Bloomberg show. A reading below 30 typically signals the market is oversold.