by Jessica Summers
Crude tumbled below $US60 a barrel for the first time this year as the worst equities collapse since the financial crisis compounded concern over unprecedented supply growth from US oil fields.
Futures in New York sank as much as 3.6 per cent, heading for their steepest weekly drop since January 2016. The widespread equities rout adds selling pressure at a time when American crude output is soaring so fast that the US is on the verge of elbowing Saudi Arabia and Russia aside as the dominant supplier.
The broader market selloff, which saw Exxon Mobil on course for its most dismal weekly showing in almost a decade, could weaken consumer sentiment, Mark Watkins, a Park City, Utah-based regional investment manager at US Bank Wealth Management, which oversees $US142 billion in assets, said by telephone. "They may get a little bit more tight on their spending, and if that's the case, it will eventually make its way into demand for oil and start to slow the rebalancing process."
Oil in New York has tumbled almost 9 per cent so far this month. Even as the Organisation of Petroleum Exporting Countries and Russia curtailed output to prop up prices, production has continued escalating in the US Traders who divine market momentum from charting and technical signals were also closely watching New York crude's 50-day moving average because a settlement below that level for several days in a row would be regarded as bearish.
West Texas Intermediate crude for March delivery slid $US2.19 to $US58.96 a barrel at 12.51pm on the New York Mercantile Exchange. Futures are poised for a 9.9 per cent decline this week.
Brent for April settlement declined $US2.02 to $US62.79 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $US3.84 premium to April WTI.
Equity traders have yet to get comfortable with the jump in benchmark US 10-year yields, and worries over unwinding bets against volatility in stocks continue to cast a shadow over markets.
"One of the things about this pull-back that we are seeing in equities, which is really tough to manage, is that there does not appear to be any good place to hide," Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone.
Oil and gas companies are feeling the pain. The S&P 500 Energy Index is on track for an 11 per cent drop this week, the largest on a weekly basis September 2011. The worst performer on Friday was Chesapeake Energy, down 9.8 per cent.
Exxon, the world's biggest explorer by market value, has lost about $US43 billion in market value during the week.
The volatility in equity markets has carried over into the oil market as well. The CBOE/Nymex Oil Volatility Index rose for a sixth day to the highest level since July.
US production surged to 10.25 million barrels a day last week, according to government data released Wednesday and is forecast to top 11 million a day this November, a year earlier than previously expected.
"The supply backlash that we have been expecting in the US because of higher prices became very real in the market psyche," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone.
Other oil-market news:
- Gasoline futures fell as much as 3.8 per cent to $US1.6988 a gallon, the lowest since December.
- 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 Forties Pipeline System hasn't returned to full operating levels following a halt on February 7, according to a person familiar with matter, who asked not to be identified because the matter is private.