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NEW YORK. — Oil dropped to the lowest level in seven months, pulling energy stocks down, as Libya revives production and fuel storage levels grow.
Futures tumbled as much as 3.1 percent in New York, heading toward the first bear market since August amid growing concerns that OPEC-led output cuts won’t succeed in balancing the market.
Libya is pumping the most crude in four years after a deal with Wintershall AG enabled at least two fields to resume production.
The amount of oil stored in tankers reached a 2017 high earlier this month, according to Paris-based cargo tracking company Kpler SAS.
“People are getting a little fatigued waiting for the production cuts to have effect,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone.
Traders are “very nervous about the near-term prospects.”
West Texas Intermediate, the U.S. benchmark price, has dropped more than 20 percent from the 2017 high of $54,45 on 23 February.
That is closing in on a bear market, which kicks in when settlement prices fall 20 percent from their peak.
Oil has stayed below $45 a barrel as supplies in the U.S. remain plentiful and the oil rig count rises to the highest level since April 2015. WTI for July delivery, which expires Tuesday, fell $1.31 to $42,89 at 10:27 a.m., after touching $42,83, the lowest intraday level since November 14.
Total volume traded was about 83 percent above the 100-day average.
The more-active August WTI contract declined $1.27 to $43.16.
Brent for August settlement slipped $1.29 to $45,62 a barrel on the London-based ICE Futures Europe exchange.
The global benchmark crude traded at a premium of $2,46 to August WTI.
The S&P 500 Energy Sector GICS Level 1 Index declined as much as 2,3 percent, with Marathon Oil Corp. falling as much as 4,3 percent and Hess Corp. down 5,8 percent. Exxon Mobil Corp. slipped 1,5 percent, while Royal Dutch Shell Plc tumbled 2,6 percent and BP Plc fell as much as 2,8 percent.
U.S. crude inventories probably shrank by 1,2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday.
Yet, American production climbed to 9,33 million barrels a day through June 9, near the highest since August 2015. Gasoline supplies probably rose 101,000 barrels last week, the survey showed.
Another factor feeding trader angst is a rise in the number of drilled-but-uncompleted wells in the nation’s oilfields. At the end of May, there were 5,946 wells in this category, the most in at least three years, according to estimates by the EIA.
In the last month alone, explorers drilled 125 more wells in the Permian Basin than they would open.
“Right now there is little support to be found in light of recent supply-side developments, including further reinstatement of production in Libya, another rise in the U.S. rig count and reports of floating storage building up again,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
Libya is pumping about 900,000 barrels a day, according to a person with direct knowledge of the matter, who asked not to be identified for lack of authority to speak to the media.
Pierre Andurand’s oil hedge fund lost 17,3 percent in the year through May as one of the world’s most prominent energy bulls suffered in the wake of last month’s OPEC meeting, according to a document outlining the fund’s performance. — Bloomberg.
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