Oil slumped for a second day on Monday, February 5, moving its lowest in a month, as rising U.S. output and a weaker physical market added to the pressure from a widespread decline across equities and commodities.
Brent crude futures LCOc1 were down 36 cents at $68.22 a barrel by 1010 GMT, while U.S. West Texas Intermediate, WTI crude CLc1 fell 13 cents to $65.32.
“Oil is caught up in this general risk-off move, not helped at the margins by a little bit of strength in the U.S. dollar,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.
The S&P 500 saw its largest one-day fall since September 2016 on Friday, but is still up 3 percent since the start of this year and up 21 percent since February 2017, having hit a record high in late January.
“The size of the move in U.S. equities doesn’t always mean this, but usually after a move like that and particularly when it follows such a long uptrend, there is follow-through selling,” Spooner said.
The physical crude market has also deteriorated in the last few weeks, as the price of North Sea oil has hit its lowest in eight months, while Russian Urals crude changed hands last week at its lowest in a year.
“We’re really going into a period of a lot of refining maintenance so it’s not unexpected that (the sell-off) is happening,” Petromatrix strategist Olivier Jakob said.
Saudi Arabia over the weekend said it had cut the official selling prices for its crude to European customers, a sign that the world’s largest oil exporter may be warding off potential weakness in the region.
Adding to the pressure on oil, which hit its highest in nearly three years two weeks ago, has been evidence of rising U.S. crude production, which could threaten the Organization of the Petroleum Exporting Countries’ effort to support prices.
Data from the U.S. government last week showed that output climbed above 10 million barrels per day in November for the first time since 1970, as shale drillers expanded operations after gains in oil prices last year.
U.S. energy companies added oil rigs for a second week in a row last week, Reuters reports.
