Oil prices steadied on Friday amid short-covering after a week-long selloff but were on track to end the month about 15 percent lower on persistent glut concerns, with the biggest decline seen for U.S. crude in a year.
Continue Reading Below
Slower economic growth and high inventories in crude and refined oil products have pressured Brent and U.S. West Texas Intermediate (WTI) crude futures some 20 percent lower from their 2016 highs, technically placing both in bear market territory.
The two benchmarks hit April lows on Friday before paring losses on what traders described as short-covering by investors taking profit on bearish bets placed over the past week.
A three-week low in the dollar also supported oil, making commodities denominated in the greenback, such as crude, more affordable to holders of the euro and other currencies.
Brent's expiring front-month contract, September, was at $42.15 a barrel by 1:02 p.m. EDT (1702 GMT), down 1.3 percent on the day and 15.2 percent on the month.
Brent's most active contract, October, was down 3 cents at $43.20 after falling earlier to $42.52, its lowest since April 19.
Continue Reading Below
WTI's September contract rose 8 cents to $41.22 a barrel, after slipping earlier to below $41 the first time since April 20. It was on track for a monthly loss of 14.7 percent, its biggest since July 2015.
Crude prices are still up more than 55 percent from 12-year lows of $26-$27 in the first quarter. The recovery faded after prices above $45 enticed more oil drillers to return to the well pad. Drillers added three rigs to raise the U.S. oil rig count for a fifth straight week this week.
Cheap crude also has led refiners to produce more fuel worldwide, adding to a bloated market. Oil majors ExxonMobil , BP and Royal Dutch Shell had dismal second quarter results from weak refining margins.
"Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end," Stephen Brennock, of London-based oil brokers PVM, said.
Weaker-than-expected U.S. economic growth also cast a shadow on oil consumption growth.
Some traders said oil could see technical support in the near-term after Brent and WTI's drop below the 200-day moving average earlier on Friday.
Analysts in a Reuters survey published on Friday said they expected higher oil prices this year based on demand growth.
"We are maintaining a bearish posture while at the same time suggesting that additional crude price declines of around $4 a barrel from current levels could require a few more weeks," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
(By Barani Krishnan; Additional reporting by Devika Krishna Kumar in New York and Libby George in LONDON Editing by Jane Merriman and Susan Thomas; Editing by Marguerita Choy)