Investing.com — futures plunged to six-year lows on Tuesday, amid fresh concerns of long-term oversupply on the global energy markets following the release of bearish data from OPEC earlier in the session.
On the New York Mercantile Exchange, WTI crude for September delivery traded in a broad range between $42.70 and $45.33 a barrel before closing at $43.13, down 1.84 or 4.06% on the day. U.S. crude futures fell below previous yearly lows from March when they bottomed at the tail end of a five-month rout. Texas Long Sweet futures have fallen sharply by more than 20% over the last month of trading.
On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $49.19 and $51.69 before settling at $49.70 a barrel, down 1.32 or 2.59% on the session. futures fell to near its January low of $48.78 when the international benchmark touched down to six-year lows. The spread between the international and U.S. benchmarks of crude stood at $6.57, above Monday’s level of $6.09 at the close.
While Saudi Arabia reported a slight decline in production last month, OPEC demonstrated little sign of cutting output as production increased moderately to remain at its highest level in more than three years. For July, Saudi output declined by 0.2 million barrels per day to 10.4 million bpd, one month after surging to multi-year highs. OPEC, meanwhile, increased output overall by 100,000 bpd to 31.5 million bpd on the month, amid production builds in Iraq, Iran, Angola and the United Arab Emirates.
The latest builds exacerbates fears of even steeper price declines as global supply continues to outpace demand by a wide margin. In June, OPEC leaders decided to keep its production ceiling unchanged above 30 million bpd even in the face of crashing oil prices. Investors await the release of the American Petroleum Institute’s weekly crude inventory report on Tuesday after the bell for further indications on the supply-demand balance nationwide.
Separately, a government report from the Energy Information Administration (EIA) on Wednesday could show that U.S. crude stockpiles fell by 1.6 million barrels for the week that ended on August 7. A week earlier, U.S. crude inventories fell by 4.4 million barrels to 455.3 million for the period ending on July 31. The level still represents its highest at this time of year in at least 80 years.
Elsewhere, the yuan fell to its lowest level in three years after the People’s Bank of China devalued its currency by nearly 2% on Tuesday in an effort to make its exports more competitive and boost its fledgling economy. In July, China’s crude imports surged by nearly 30% to its highest monthly level on record. China is the world’s second-largest consumer of crude oil behind the U.S.
The , which measures the strength of the greenback versus a basket of six other major currencies, inched up more than 0.15% to an intraday high of 97.64. Last week, the index soared to a four-month high above 98.40.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
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