Oil slumps to multi-month lows on supply glut, stronger dollar
Investing.com – U.S. oil futures fell to the lowest level in more than four months on Thursday, while Brent traded close to a six-month low, amid perceptions that a global supply glut may stick around for much longer than once anticipated.
for delivery in September on the New York Mercantile Exchange dropped to an intraday low of $44.47 a barrel, a level not seen since March 18, before trading at $44.64 during U.S. morning hours, down 51 cents, or 1.13%.
A day earlier, Nymex oil fell 59 cents, or 1.29%, to close at $45.15 as an unexpected gasoline stock build last week dented the demand outlook.
The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 98.14 early on Thursday, not far from the previous session’s three-month peak of 98.33.
Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.
The greenback has been boosted recently by expectations that the improving U.S. economy will prompt the Federal Reserve to raise short term interest rates as early as September.
The U.S. Department of Labor said earlier that the number of individuals filing for rose by 3,000 last week to 270,000. Analysts had expected initial jobless claims to rise by 6,000 to 273,000 last week from the previous week’s total of 267,000.
First-time jobless claims have held below the 300,000-level for 22 consecutive weeks, which is usually associated with a firming labor market.
Market players now looked ahead to Friday’s U.S. nonfarm payrolls report, amid ongoing expectations for a September rate hike. The consensus forecast is that the data will show jobs growth of 223,000 last month, while the jobless rate is forecast to hold steady at 5.3%.
WTI oil futures dropped $12.22, or 21.24%, in July, the biggest monthly loss since October 2008, as worries over high domestic U.S. oil production weighed.
Industry research group Baker Hughes (NYSE:) said Friday that the number of rigs drilling for oil in the U.S. increased by five last week to 664, the second straight weekly gain.
Elsewhere, on the ICE Futures Exchange in London, for September delivery shed 20 cents, or 0.41%, to trade at $49.39 a barrel. On Wednesday, London-traded Brent prices tumbled to $49.02, the lowest since January 27, before ending at $49.59, down 40 cents, or 0.8%.
Brent futures plunged $11.39, or 18.6%, last month as ongoing worries over a global supply glut drove down prices.
Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.
Meanwhile, the spread between the Brent and the WTI crude contracts stood at $4.75 a barrel, compared to $4.44 by close of trade on Wednesday.