Published: Thu, June 06, 2019
Money | By Ethel Goodwin

Oil plunges into bear market territory, could this be why?

Oil plunges into bear market territory, could this be why?

Meanwhile, weekly US oil production ticked up to an all-time high 12.4 million bpd, according to a preliminary reading from EIA.

WTI fell 13 cents, or 0.2%, to $53.12 a barrel on the New York Mercantile Exchange at 11:43 am in Singapore after dropping as much as 39 cents earlier.

In gasoline, the authority reported a build of 3.2 million barrels for the week to May 31.

The inventory builds were said to be caused by USA crude imports rising last week by 1.1 million barrels per day (bpd), while crude production added another 100,000 bpd to a new peak at 12.4 million bpd.

Oil prices have fallen sharply on fears about slowing global demand, but won a respite on Tuesday after a global stock market rally on hopes of a cut in US interest rates.

Official numbers from the U.S. Energy Information Administration are due later on Wednesday.

"Saudi Arabia's preference for continuing with, or even deepening, the OPEC+ output cut commitment has also provided a lift to prices", said Abhishek Kumar, Head of Analytics at Interfax Energy in London.

To prevent oversupply and prop up the market, the Organization of the Petroleum Exporting Countries, together with allies including Russian Federation, has withheld production since the start of the year.

Brent Crude oil futures were lower by about $1.30, or 2.1%, at $60.67 around mid afternoon.

Fears over trade intensified when US President Donald Trump announced punitive tariffs against Mexico, a major oil supplier to the United States.

The familiar spectacle of analytical forecasts of crude inventory volumes proving to be wildly off the mark served on Wednesday to continue the commodity's price plunge, with the Energy Information Agency reporting that us crude inventories rose 6.8 million barrels last week compared with expectations for an 849,000 barrel drawdown.

The group will set its policy when it meets later this month or in early July.

Now the main factor is the trade war between China and the U.S. The logic of traders is quite simple here: "if the trade war continues, the global economy will begin to slow down, therefore, futures should be sold", he said. Vitol Group, the world's largest oil trader, expects OPEC and its allies to roll over output targets that expire in June after Saudi Energy Minister Khalid Al-Falih said Monday he was committed to doing whatever it takes to stabilize markets. OPEC's de-facto leader Saudi Arabia said on Monday a consensus was emerging for continued cuts in the second half of the year to ensure market stability.

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