U.S. oil prices were in bear market territory Friday, settling with a weekly loss of more than 5% on the heels of a continuing glut of crude supplies, a rise in domestic oil-drilling rigs and China-demand worries.
Oil futures are off about 22% since their $61-a-barrel highs in June, fitting the bill for a bear market. The bear market was triggered “by the generally growing realization that the already oversupplied oil market would face even looser conditions, largely triggered by sharp gains in Saudi Arabian supplies each month,” said Matt Parry, senior oil analyst at the International Energy Agency in Paris, in an email. September West Texas Intermediate crude fell 31 cents, or 0.6%, to settle at $48.14 a barrel on the New York Mercantile Exchange. Based on the most-active contracts, prices lost 5.4% for the week, down four weeks in a row. The September contract itself fell about 6% from its close last Friday. WTI oil briefly dropped below the $48 level after data from Baker Hughes Inc. released Friday showed a sizable weekly increase in the number of active U.S. rigs drilling for oil.
Brent crude the global-oil benchmark, fell 65 cents, or 1.2%, to $54.62 a barrel on London’s ICE Futures exchange, with prices down 4.3% for the week. “Crude oil is struggling for any upside gain and experienced another depraved week as the inventory data released this week reminded us once again about the extra oil glut on the market,” said Naeem Aslam, chief market analyst at AvaTrade.
Early Friday, Chinese manufacturing data disappointed markets. The data “painted another fragile picture for the oil demand,” said Aslam. China is the world’s second-largest consumer of oil. The Caixin China Manufacturing Purchasing Managers’ Index’s initial reading stood at 48.2 in July. It’s at a 15-month low and came in significantly below market expectations.
For the week, “a mix of a stronger U.S. dollar and the threat of new supplies coming from Iran have blunted any bullish sentiment” in the energy complex, said Tim Evans, chief market strategist at Long Leaf Trading Group. The dollar index traded higher Friday and was up month to date, but fell for the week. The key $50 price support for WTI oil has been broken and “that has attracted new short selling, which has been evident in the increased levels of trade volume,” Evans said.
Data from Baker Hughes Friday didn’t help. It showed a weekly rise of 21 in the number of active U.S. oil drilling rigs to 659. The total active rig count, which includes natural-gas rigs, was at 876, up 19.