Oil prices plunged to their lowest in six weeks on Thursday, February 8, after data showed U.S. crude output had reached record highs and the North Sea’s largest crude pipeline reopened following an outage.
Brent crude futures LCOc1 dropped 58 cents to $64.93 a barrel by 1157 GMT, having hit a 2018 low of $64.77 earlier. U.S. futures CLc1 fell 48 cents to $61.31 a barrel.
Brent futures have lost about 8 percent since reaching a four-year high above $71 in late January.
“This is more a timely correction. I don’t believe it’s going to come significantly lower,” PVM Oil Associates strategist Tamas Varga said.
Investors in crude are still sitting on one of the largest bullish positions in history. Money managers own more 1 billion barrels of crude oil through their holdings of U.S. and Brent futures and options.
Oil prices were dented by the restart of the Forties pipeline in the North Sea, following an outage the previous day that had sent prices higher when it was announced.
The pipeline, which carries around a quarter of all North Sea crude output and roughly a third of Britain’s offshore natural gas production, shut on Wednesday for the second time in two months after a valve closure at a Scottish facility.
The U.S. Energy Information Administration raised its 2018 average output forecast this week to 10.59 million barrels per day (bpd), up 320,000 bpd from its forecast a week earlier.
At 10.25 million bpd, U.S. output exceeds the previous record of 10.044 million bpd in 1970 and overtakes Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries.
“It is now clear that oil prices in late January were too high to keep the oil market balanced in the long term,” Commerzbank analysts wrote. “This is because U.S. oil production is now rising so sharply that there is a risk of renewed oversupply if OPEC does not voluntarily renounce market share.”
U.S. crude inventories C-STK-T-EIA rose 1.9 million barrels in the week to Feb. 2, to 420.25 million barrels.
Chinese consumption of oil meanwhile is rising, as reflected by the surge to a record 9.57 million bpd in imports in January, according to official customs data.
