Oil prices took another tumble on Wednesday to fresh five-year lows on signs that the global supply glut driving the selloff is deepening.
New data out of the U.S., the world’s biggest oil consumer, showed an unexpected increase in crude supplies last week. Meanwhile, the latest projections from the Organization of the Petroleum Exporting Countriespoint to lower demand for the group’s oil in 2015.
The benchmark U.S. oil price slid 4.5% to $ 60.94 a barrel, the lowest level since July 2009 on the New York Mercantile Exchange. It was the biggest one-day drop since Nov. 28, the session that followed OPEC’s decision to maintain its oil-output target.
Brent crude, a gauge of global prices, fell 3.9%, or $ 2.60, to $ 64.24 a barrel, also the lowest since July 2009 on ICE Futures Europe.
The latest plunge in crude rippled through U.S. stocks, helping to drive major indexes lower. The Dow Jones Industrial Average dropped 268.05 points, or 1.5%, to 17533.15, its biggest one-day decline since Oct. 9. Energy stocks were the worst-performing sector of the S&P 500 on Wednesday, with oil companies among the day’s biggest laggards.
As prices have plunged more than 40% in about six months, market watchers have scrambled to adjust forecasts and explain the glut of oil that is forcing producers to cut prices as they compete for buyers. Supply growth, particularly in the U.S., exceeded expectations, while demand growth has been moderate due to a slowdown in China and Europe.
“What I’m looking at is a market that has no reason yet to bounce,” said Jan Stuart, global energy economist at Credit Suisse Group AG. “OPEC basically put itself out of play. […] There’s no indication that [the market is] getting any less weak.”
OPEC, which controls about one-third of global oil production, opted last month to maintain its output quota of 30 million barrels a day, even though demand for OPEC crude is expected to fall below that level. OPEC said Wednesday that demand for its oil will decline to 28.9 million barrels a day in 2015, down from 29.4 million barrels a day in 2014.
The amount of crude that refiners and traders have on hand rose by 1.5 million in the week ended Dec. 5 to 380.8 million barrels, enough to keep the nation’s refineries humming at their current rates for about 23 days, according to the U.S. Energy Information Administration. That compares with expectations for a decline of 2.7 million barrels based on estimates of analysts surveyed by The Wall Street Journal.
U.S. crude-oil output last week rose to 9.1 million barrels a day, the highest level since 1983, according to the EIA.
“Obviously there’s still unabated strength in the production sector,” said John Kilduff, founding partner of Again Capital in New York. “This is just feeding on itself.”
Oil companies that have made big bets on shale-rock formation in the U.S., a resource that became economically feasible to tap with the advent of new drilling technology, have become victims of their own success. Their shares have been pummeled by the decline in oil prices, which is likely to cut deeply into their revenues. Continental Resources Inc. fell 7.3%, Penn Virginia Corp. fell 4.6% and Whiting Petroleum Corp. declined 10%.
Even bigger energy companies with more diversified operations took a hit on Wednesday.
These companies have raced to adjust their production and spending plans to suit an environment of sharply lower oil prices.
BP PLC, which has aggressively slimmed down since the 2010 Deepwater Horizon disaster, became the latest to unveil cuts, outlining plans Wednesday to book $ 1 billion in restructuring charges over the next year and reduce spending on development by as much as $ 2 billion. U.S. oil giant ConocoPhillips also rattled the market earlier this week when it said it would reduce capital spending by 20%.
But plans to cut investment in new production in the U.S. won’t immediately lower global oil supplies, said Jack Rivkin, chief investment officer at Altegris Advisors LLC, which oversees about $ 2.5 billion.
“In the meantime, everybody else around the world is in the same position: They need the revenues,” he said. “It’s going to take an improvement in global economies to actually create a true bottom here in oil prices.”
Most of Altegris’s managed-futures funds have wagers that oil prices will fall, Mr. Rivkin said.
Oil prices have sunk even as money managers, including hedge funds, have added to their aggregate bet that prices will rise. Money managers added to their net bullish position in both the Nymex and Brent markets in the week ended Dec. 2, according to the most recently available data from the U.S. Commodity Futures Trading Commission and Intercontinental Exchange Inc.
Trying to guess where prices will bottom out is too risky for John McLane, president of Mobius Asset Management, which manages $ 6.5 million. Mr. McLane has small wagers that oil prices will fall but is holding most of his energy fund in cash.
“People always use the expression, ‘Catching a hot knife.’ This is like catching a nuclear bomb,” he said. “This does not have any twinge of stopping.”
Gasoline futures fell 8.51 cents, or 4.9%, to $ 1.6385 a gallon. Diesel slid 4.31 cents, or 2.1%, to $ 2.0409 a gallon.
—Summer Said contributed to this article.
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