MW: Oil tumbles under $28 on February contract’s expiration day
Oil futures traded sharply lower on Wednesday, as a fresh slide in the global financial markets and continued concerns about the glut of crude pushed the February West Texas Intermediate crude contract below $28 a barrel ahead of its expiration.
The International Energy Agency said in a report released Tuesday that the world may soon drown in oversupply. There is also “a record short position in hedge funds and we have the promise of more Iranian oil on the world market,” said Phil Flynn, senior market analyst at Price Futures Group.
“Add it all up and it’s causing the crude-oil market to crater around the globe,” he said in a note Wednesday.
Read: This chart shows how long it could take Iran to get its oil production up to speed
On the New York Mercantile Exchange, February WTI crude CLG6, -4.88% fell $1.19, or 4.2%, to $27.27 a barrel ahead of the contract’s expiration at Wednesday’s settlement. March crude CLH6, -4.29% which will become the front-month contract, dropped $1.11, or 3.8%, to $28.46 a barrel. WTI prices continue to trade at their lowest levels since September 2003.
Brent crude for March delivery LCOH6, -4.07% the global oil benchmark, was down 93 cents, or 3.8%%, to $27.68 a barrel on London’s ICE Futures exchange, after trading as low as $27.70.
Read: Here’s why you shouldn’t freak out about crude oil’s crash
Fears about an economic slowdown in China, the world’s second-biggest economy, have rattled financial markets at the start of the year and added to the bearish sentiment in the oil market.
“Bearish fundamentals have clearly been weighing on oil prices [this year], but financial selling on macro concerns has also played a major role,” Citi said in a report. The bank cut its oil-price forecasts on the back of concerns about the Chinese economy and sees both benchmarks averaging $34 a barrel this quarter and $31 in the next.
Meanwhile, a selloff in global equities Wednesday also contributed to fretting in the market.
Hong Kong stocks HSI, -3.82% hit a 3½-year low and Japan’s Nikkei NIK, -3.71% closed in bear market territory, extending this year’s selloff in Asia. European stocks SXXP, -3.57% were also sharply lower, while U.S. equities tumbled.
Read: The bear market in stocks has finally arrived, says Michael Sincere
The oil market awaits weekly data on petroleum supplies, which have been delayed due to Monday’s holiday. The American Petroleum Institute will release its report late Wednesday, while the Energy Information Administration’s data will come out Thursday morning.
Analysts polled by Platts forecast an increase of 2.9 million barrels in crude-oil stockpiles for the week ended Jan. 15. They also expect to see an increase of 1.5 million barrels in gasoline inventories and a decline of 500,000 barrels for distillate stocks.
Back on Nymex, reformulated gasoline blendstock for February RBG6, -0.78% fell less than a cent to $1.019 a gallon and February heating oil HOG6, -4.71% lost 4.7 cents, or 5.2%, to 86.06 cents a gallon.
February natural gas NGG16, +1.20% traded at $2.123 per million British thermal units, up 3.2 cents, or 1.5%.
