New York – U.S. crude tumbled below $40 per barrel on Monday for the first time since April, as oil prices settled down nearly 4 percent on heightened worries of a crude glut despite peak summer fuel demand.
A nearly 15-percent slump in U.S. crude prices in July, the biggest monthly loss in a year, also triggered liquidation as trading began for August.
“It’s stop-loss technical selling combined with sheer liquidation by those fearing we’ll soon be swimming in oil again,” said Phil Davis, trader at PSW Investments in San Diego, California. “We’ve had crude builds during the summer, when we were supposed to be having runaway draws from record driving.”
U.S. West Texas intermediate (WTI) crude plumbed $39.86, its lowest since April 20, before settling at $40.06, down $1.54, or 3.7 percent.
Brent crude closed down $1.39, or 3.2 percent, at $42.14 a barrel, after a session low of $41.87.
Marathon Petroleum unexpectedly shut its lone crude unit and an associated unit at its 212,000 barrel-per-day refinery in Robinson, Illinois, at the weekend, according to a source.
A Reuters poll on Monday showed U.S. crude stockpiles likely fell last week, after a surprise rise in the previous week ended nine straight weeks of drawdowns.
Still, the market focused on reports such as the Reuters survey on Friday which showed output from the Organization of the Petroleum Exporting Countries likely rose in July to its highest in recent history as Saudi Arabia pumped at near record level, Iraq raised production and Nigeria boosted crude exports.
Other data from last week showed the United States added 44 oil drilling rigs in July, the most for a month in two years, intensifying concerns of a growing global glut.
Crude prices remained nearly 55 percent above 12-year lows of $26 to $27 hit in the first quarter. But WTI and Brent have also slipped into bear market territory since last week after losing more than 20 percent from 2016 highs above $50 in June.
Hedge funds slashed their positive bets on U.S. crude to a five-month low during the week to July 26, while holding a record net short, or bearish position, on gasoline.
British bank Barclays said Brent could fall further from the $46.50 it has averaged thus far in the third quarter, and refineries could “find themselves in the line of fire”.
Iran’s oil minister told state television the market was oversupplied but expected balance to be restored.
French bank Societe Generale said it expected crude prices to bottom out in the high $30 levels and not return to the $26-27 lows from earlier in the year.