Oil Prices Officially Enter Bear Market

Crude oil extended its slide on Thursday, with the U.S. futures benchmark encroaching into bear-market territory following weeks of relentless declines.

WTI Succumbs to the Bears

Crude futures were down across the board in the latter half of the week, as concerns over rising stockpiles and higher production continued to grip the market. The West Texas Intermediate (WTI) contract for U.S. crude reached a low of $60.67 a barrel on the New York Mercantile Exchange. It was last down 24 cents, or 0.4%, a $61.43 a barrel. Brent crude declined 28 cents, or 0.4%, to $71.80 a barrel on London’s ICE futures exchange.

WTI has officially entered bear market territory, which is defined as a fall of 20% or more from a recent high. The 20% threshold was met on Thursday as prices resumed their relentless drop from four-year highs set on Oct. 3. Market sentiment has shifted dramatically over that stretch, with investors now fearful that Saudi Arabia and Russia will more than offset a loss of Iranian exports following the resumption of U.S. sanctions against Tehran.

Higher Production on the Horizon

Russia and the Saudis aren’t the only players expected to ramp up production in the near future. The U.S. Energy Information Administration (EIA) recently upped its outlook on domestic crude production, calling for 12.1 million barrels per day in 2019 compared with a previous estimate of 10.9 million barrels per day.
EIA data on Wednesday showed a sharp rise in weekly crude inventories, placing further pressure on oil prices. Commercial stockpiles surged by 5.8 million barrels in the week ended Nov. 2, bringing the total inventory to 432 million barrels. That’s the highest since early June.

Meanwhile, members of the Organization of the Petroleum Exporting Countries (OPEC) are expected to meet this weekend to go over market fundamentals and determine whether additional supply cuts are warranted. Analysts at Commerzbank believe the cartel may have no choice but to scale back output to re-balance the market. The Saudi-led production group will meet in Abu Dhabi on Sunday.

In other news, October was another record-setting month for Chinese crude imports as the world’s second-largest economy stocked up on Iranian barrels before U.S. sanctions took effect. China imported an average of 9.6 million barrels per day last month, government data showed on Thursday.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi