Oil prices fell on Friday.  US WTI fell below the $60 mark for the first time since late December.  Seven Generations photo.

Oil prices down over 9 per cent from 2018 high in late January

On Friday, oil prices dropped for a sixth straight day and are trending towards their biggest weekly loss in 10 months due to record-high US production and concerns about a steep increase in global supplies.

According to Reuters, the decline in oil prices is happening while global equity markets are in turmoil due to inflation fears.

By 12:34 p.m. EST, Brent crude had dropped $1.87 to $62.94/barrel, the lowest since Dec. 18 and US WTI was down $1.94 to $59.21/barrel, the lowest since late December.  The Canadian Crude Index fell to $31.57.

Both Brent and WTI have dropped over 9 per cent from their 2018 highs from late January.  For the week, Brent is on track for a weekly loss of nearly 7 per cent, its largest since April.  WTI is heading for a nearly 8 per cent decline, the steepest drop since March.

“It has now become painfully clear for beleaguered oil bulls that the early-year rally was not justified,” Reuters reports PVM Oil Associates’ Stephen Brennock said in a note. “In its place is a deepening price rout that has quashed any lingering pockets of optimism.”

The US Energy Information Administration reported US crude production rose to 10. 25 million barrels per day (b/d) last week.  As well, the Forties pipeline in the UK reopened after a short shutdown this week.

And on Thursday, Iran announced plans to boost its production in the coming four years by at least 700,000 b/d.  Brennock calls these circumstances “a hat-trick of heartaches” for oil bulls.

“This will be a tall order as the spectre of fresh US sanctions looms but nevertheless exacerbated the sell-off,” Brennock said.

The Trump administration is considering restricting imports of Venezuelan crude and exports of refined US crude products to the beleaguered South American country as part of an effort to put pressure on Venezuelan President Nicolás Maduro.

Recently, US production output rising to over 10 million b/d put American producers on even ground with Saudi Arabia, the largest OPEC producer.  The US Energy Department forecasts that US crude output will hit 11 million b/d by the end of the year.

The rising US output has put pressure on OPEC’s efforts to cut global crude supplies and is cutting into the cartel’s market share in Asia.

“We think that surging supply and slowing demand growth will tip the market back into a surplus this year,” Reuters reports analysts at Capital Economics said in a note.

On Friday, Baker Hughes reported the US oil rig count rose by 26 to 791, up 200 from this time last year and the highest count since April 2015.  In Canada, the rig count fell by 13 to 221, but is up 14 from one year ago.