The price of Brent crude fell below the $ 70-a-barrel mark Friday for the first time in seven months, moving into the brink of bear-market territory.
Brent crude, the global benchmark, fell 1.6% to $ 69.55 a barrel on London's ICE Futures Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures fell 1.7% at $ 59.67 a barrel.
The global benchmark is ready to join WTI in the bear-market region, after US prices on Thursday extended losses from a four-year high in early October exceeding 20%.
Bear market is generally defined as a 20% decrease from market peaks and Brent recently fell 19.2% from the four-year high reached in October.
Oil-specific factors such as increased production and softening in US oil sanctions against Iran have been combined with broader market concerns about global economic growth and revenue growth – which prompted a stock market selloff during October – to curb oil prices in recent years.
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"We have seen high production from OPEC in recent months – supply concerns have been lost – and the focus has shifted to the fact that the global economy is slowing down, especially in China," said Caroline Bain, chief commodity economist at Capital Economics.
Sales have risen in recent days with the issuance of the Energy Information Administration number which showed US oil inventories at a five-month high. Delegates from the Organization of Petroleum Exporting Countries will have this picture when they meet with non-OPEC members this weekend in Abu Dhabi.
Investors will continue to watch the headlines of the OPEC + conference, as a failure to signal a reversal in recent output increases is likely to pile up further pressure on prices, Commerzbank analysts said in a note.
While many factors have been combined to drive oil sales, investors looking beyond short-term factors have good reasons to be optimistic about price rebounds, analysts said.
The Trump administration's exception of Iran's oil sanctions will be temporary and the equity market has stabilized. In addition, communication from Saudi Arabia that the Gulf country can utilize reserve production to bridge the gap left by the lack of excessive production of Iran, Venezuela and Libya, according to Harry Tchilinguirian, head of global commodity market strategy at BNP Paribas.
"While short-term factors have suppressed sentiment, we don't think the Saudis can keep up with these countries and oil demand will increase seasonally, so this might be a good time to get into oil," said Mr. Tchilinguirian.
Adding to the pressure on commodities on Friday is the rise of the US dollar. The WSJ Dollar Index – which measures the US currency against a basket of 16 other people – rose 0.2%, after reversing losses in recent weeks and extending year-to-date increases to 5.3%.
Dollar-denominated commodities such as oil tend to be more expensive for holders of other currencies when the greenback rises.
Attention also focused on North American production, after Montana judge ordered the termination of construction on the Keystone XL pipeline.
Nymex blendulated gasoline blendstock – a benchmark gasoline contract – fell 0.19% to $ 1.64 per gallon. ICE gasoil changed hands at $ 650.75 per metric ton, down 2.8%.
Write to David Hodari at [email protected]
Correction & Amplification
WTI fell 20% from its peak market in October. The previous version of this article said WTI was down 20% this week.