Oil prices fell to multi-month lows on Friday as global supply increased and investors worried about the impact on fuel demand from of lower economic growth and trade disputes.
Benchmark Brent crude oil fell to its lowest since early April, down more than 18 percent since reaching four-year highs at the beginning of October. Brent was 30 cents a barrel lower at $70.35 by 0850 GMT, down 3.5 percent for the week and more than 15 percent this quarter. US light crude oil dropped 40 cents to $60.27, set for a fifth weekly fall, down 4.5 percent this week and more than 21 percent since early October.
“Oil prices … are now officially in a bear market,” said William O’Loughlin, investment analyst at Rivkin Securities.
Oil peaked in October on concerns that US sanctions on Iran that came into force this week would deprive the oil market of substantial volumes of crude, draining inventories and bringing shortages in some regions.
But other big oil producers, such as Saudi Arabia, Russia and shale producers in the United States, have increased output steadily, more than compensating for lost Iranian barrels.
The sanctions, meanwhile, are unlikely to cut as much oil out of the market as expected. Washington has granted exemptions to Iran’s biggest buyers, allowing them to buy limited amounts of oil for at least another six months.
China National Petroleum Corp (CNPC) said on Friday that it was still taking oil from Iranian fields in which it has stakes.
Washington has said it wants to force Iranian oil exports down to zero, but Bernstein Energy now expects “Iranian exports will average 1.4 million to 1.5 million barrels per day (bpd)” during the exemption period, versus almost 3 million bpd in mid-2018.
“As OPEC exports continue to rise, inventories continue to build, which is putting downward pressure on oil prices,” analysts at Bernstein Energy said. “A slowdown in the global economy remains the key downside risk to oil.”
A glut in the refining sector, where a wave of unsold gasoline has pulled profit margins into negative territory, may also lead to a slowdown in new crude orders as refiners scale back operations.
In China, automobile sales fell 11.7 percent in October from a year earlier, the country’s top auto industry association said on Friday, dragging year-to-date sales growth into negative territory for the first time.
The drop, the steepest since a 26.4 percent tumble at the start of 2012, also marked the fourth straight month of declining sales in the world’s largest auto market.