Other derivatives paint a similar story, with aggressive oil put options – contracts giving the right to sell oil at a particular level in the future – appearing as low as $35 and even $30 a barrel for U.S. crude. An unexpected price rally in the second quarter allowed some companies to lock in profitable prices for next year and add new drilling rigs.
U.S. crude oil, was up 10 cents at $40.90 a barrel by 1340 GMT, after hitting a new 6-1/2-year intraday low of $40.21.
Brent crude for October dropped 25 cents to $46.91 a barrel.
US crude inventories rose to 456.2 million barrels in the week ended August 14, nearly 100 million above the five-year average.
Some weak manufacturing data from China and the continued sell-off in the Chinese stock market added to the negative mood, with most major global equity markets firmly in the red. “Fear of slowing growth in China is increasing”.
“Eventually, supply and demand will come into balance, but it will take a while”, Chip Hodge, who oversees a $9bn natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “The thought that crude can go lower for longer is definitely gaining a toehold here”. The continues fall in oil prices is the result of the global market’s failure to reach equilibrium between demand and supply. Brent also fell to a six- year low.
The U.S. S&P.SPX fell about 2 percent on Friday and is down over 4 percent for the week, its worst weekly decline in at least three years.
Nymex reformulated gasoline blendstock-the benchmark gasoline contract-fell 1.8% to $1.51 a gallon. In the year-ago period, the supply cover was 22.1 days. Ten were bullish on futures while 12 said they’re neutral. “The benefit of lower commodity prices, in general, is a tailwind for the global economy”. Private-equity firms, which have amassed large energy-focused funds, could find buying opportunities among distressed producers.
“Furthermore, investors could remain cautious amid an imminent increase of U.S. interest rates in September“.
The rising crude oil inventories and oversupply concerns could drag crude oil prices to new lows. Oil prices have been falling solidly for eight consecutive weeks.
A federal appeals court on Friday revived Obama administration regulations that guarantee overtime and minimum-wage protection to almost 2 million home-health-care workers. Saudi Arabia is just one country that has been refusing to stop regular oil production, and this country is now amassing record amounts of oil as per the usual.
Besides OPEC not cutting production, a factor in the oversupply of oil is the lowering of Chinese demand as a fallout of slowdown in growth. Is it worth it to produce so much crude well over 3 million barrels per day globally in order to maintain a market share and by doing so depleting the sources of oil?
OPEC officials reconfirmed its market-share strategy at its last meeting in June.