U.S. crude oil prices on Friday dove below $40 a barrel for the first time since the 2009 financial crisis, notching their longest weekly losing streak in 29 years after a further rise in U.S. drilling and a drop in Chinese manufacturing.
Continue Reading Below
Oil prices pushed briefly below the $40-pivot mark following weekly data that showed U.S. energy firms added two oil drilling rigs last week, the fifth increase in a row. The rise in rigs, which is emerging now after a second quarter lull in prices, is adding to concerns U.S. shale production is proving slow to respond to falling prices, prolonging a global glut.
Energy markets slid early in the day as world stock and currency markets joined an extended rout across raw materials this week, a slump accelerated on Friday by data showing activity in China's factory sector shrank at its fastest pace in almost 6-1/2 years in August.
With deepening gloom over demand growth from the world's second-biggest oil user, and expectations for a significant build-up in surplus oil stocks this autumn, dealers said most oil traders were unwilling to fight the tide.
"The trend is down - stick with it."
U.S. October crude <CLc1> fell $1.07, or 2.6 percent, to $40.25 a barrel by 1:41 p.m. EDT, having touched a new 6-1/2-year low of $39.86 a barrel. Front-month U.S. crude has fallen 33 percent over eight consecutive weeks of losses, the longest such losing streak since 1986.
Brent oil <LCOc1> fell $1.27, or 2.8 percent, to $45.35 a barrel, after hitting a low of $45.09 and threatening to break below $45 a barrel for the first time since March 2009.
Although the current collapse in oil prices, the second this year, has raised alarm within the Organization of the Petroleum Exporting Countries (OPEC), including some of its core Gulf members, there is no indication they will reverse their policy of keeping production wide open to defend market share, delegates told Reuters this week.
As a result, oil traders are looking for further signs of a slowdown in U.S. production to put a floor under the market, something that appears to be taking far longer than expected as drillers grow more efficient and drive down costs.
Deferred oil prices have fallen sharply this week as a result, hit even harder than near-term futures. The December 2006 <CLZ6> contract fell $1.50 on Friday, taking its weekly loss to over 9 percent, the biggest drop in over four years. December 2018 <CLZ8> was down more than $2 a barrel.
(Additional reporting by Christopher Johnson in London and Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson, William Hardy, Paul Simao and Marguerita Choy)