Oil headed for its worst week in almost a year as the global risk-asset rout troubled investors already concerned over growing U.S. supply.
Futures traded in New York are on track to post a 7.8 percent slump this week as equities tumbled around the world. Adding to the alarm was data that showed U.S. oil production at a new high, and key technical indicators pointing to a further retreat in prices. West Texas Intermediate earlier slumped close to $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. Yet fears that American shale production will outweigh efforts by the Organization of Petroleum Exporting Countries to cut global inventories are back to the fore as data show U.S. output now eclipses Saudi Arabia’s. Another slump in U.S. equity markets on Thursday highlighted a volatile trading week.
“After the settlement yesterday, oil prices plunged with equities,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “We’re still trading around those levels, but need to wait and see what the U.S. markets will do.”
WTI for March delivery fell as much as $1 to $60.15 a barrel on the New York Mercantile Exchange before trading at $60.32 at 8:27 a.m. New York time. Prices are on course for their biggest weekly loss since March 10. Total volume traded was about 19 percent below the 100-day average.
Brent for April settlement dropped 56 cents to $64.25 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $4.05 premium to April WTI.
U.S. production surged to 10.25 million barrels a day last week, according to government data released 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 Corp. in the U.S. to PetroChina Co. 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. Futures on the Dow Jones and S&P 500 traded lower on Friday.
Other oil-market news:
China will end a 25-year wait as yuan oil futures start trading on March 26. They will include seven deliverable grades of oil.
The Cboe/Nymex Oil Volatility Index increased another 1.2 percent on Thursday, gaining more than 26 percent this week.
The U.S. 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.