(Bloomberg) -- Brent futures dropped below $70 a barrel for the first time in more than two years, a fresh leg lower in a price slump spurred by robust supplies, demand concerns and rampant speculative selling.
The global benchmark fell 3.7% to settle at $69.19 a barrel while West Texas Intermediate crude slid 4.3% to settle at $65.75 a barrel, the lowest closing prices for both grades since December 2021.
Downbeat economic data from the US and China — including weak import figures released Tuesday — have stirred fears about oil demand in the top two consumers, adding to concerns that a surplus will emerge next year and fueling record bearish positioning. That’s being compounded by surging output in producing nations outside the Organization of Petroleum Exporting Countries.
“Crude is struggling to find a floor as buyers lack confidence to buy the dip, creating an air pocket lower on limited incremental news,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “Data out of China remains tepid.”
The bearish rut comes despite the OPEC+ alliance postponing its original plan to add 180,000 barrels a day next month as it gradually restarts output that was halted since 2022 in a bid to shore up prices.
Even after changing the output plan, OPEC kept its demand forecast mostly steady in a market outlook released this week. The International Energy Agency — which previously forecast a surplus next year — is due to publish its own monthly report this week.
“The softening Chinese demand has been the biggest bearish aspect, and many traders are now beginning to think the slackening demand from Asia is going to be a longer-term problem,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.
In addition to falling headline prices, the market’s weaker outlook is showing up in a dramatic shift in the oil futures curve. Having traded in a bullish backwardation structure for much of the last few years, the Brent futures curve is now essentially flat, reflecting ample spare production capacity across the globe.
A handful of gauges further along the curve even flipped into a bearish contango structure for the first time in several years.
Tropical Storm Francine is set to become a hurricane Tuesday as it churns toward Louisiana, forcing some oil drillers to halt production and evacuate crews in the Gulf of Mexico. On its expected track, Francine may rake nine major platforms. However, Babin notes that Francine may affect refiners rather than just crude production, which is a negative for oil prices.
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