Story by The Wall Street Journal
U.S. oil prices fell to a new six-year low Thursday as a combination of worries about global economic growth to a strengthening dollar, increasing crude supplies and a major U.S. refinery outage weighed on the market.
Light sweet crude for September delivery fell $1.07, or 2.5%, to $42.23 a barrel, slipping below the low for the year set Tuesday and touching its lowest point since March 3, 2009. It was the latest new blow for oil prices, which have been in a 14-month tailspin as surging U.S. production and an unwillingness on the world’s oil cartel to cut back on production have led to abundant supplies.
The U.S. oil benchmark has now fallen more than 31% since topping out this year in early June and is down more than 60% since June of last year, as the full scope of booming U.S. production became clear and the world’s oil cartel refused to cut back on production in an effort to maintain market share rather than shore up prices. Analysts say there is little on the horizon that would suggest a reversal in crude anytime soon, and some say it could soon break below $40 a barrel—an unthinkable milestone just one year ago.
“We are now trading at levels not seen since the depths of the great recession,” said Stephen Schork, president of research consultancy The Schork Group. “The overall trend in this market is very bearish.”
On Thursday, analysts said macroeconomic factors including a strengthening dollar and continued concerns about growth in China, a key driver of oil demand growth, in the wake of its currency devaluation earlier in the week weighed on prices.
“It’s more of a macro mood play because of the concerns about the global economy,” said Phil Flynn, senior account executive at brokerage Price Futures Group in Chicago.
Still, the outage of a 290,000-barrel-a-day distillation unit at BP PLC’s Whiting refinery in Indiana was expected to reduce commercial crude demand, further adding to stockpiles. Other U.S. refineries are starting to slow production and approach maintenance season now that the U.S. is past the peak of summer driving demand.
Meanwhile, the U.S. Energy Information Administration said Thursday that Iran could begin selling as much as 100,000 barrels a day from storage before the end of the year. That came one day after the International Energy Agency said Iraq oil production rose to an all-time record of 4.2 million barrels a day in July, adding to global supplies.
The global Brent crude contract fell 44 cents, or 0.9%, to $49.22 a barrel Thursday.
In refined product markets, gasoline futures fell 4.94 cents, or 2.8%, to $1.7141 a gallon, while diesel futures fell 1.82 cents, or 1.2%, to $1.5687 a gallon.