Investing.com – Oil prices fell again on Friday, ending with an 11% weekly loss, the largest in nearly three years. Bears are closing in on what could be their ultimate prize before the New Year, a test of the $40 support level.
A surprise climb in the U.S. rig count, showing a rise in drilling despite the bear market for oil, and a slump on Wall Street on fears of a government shutdown, were all that were needed to seal a fourth day of losses of out five in crude.
U.S. West Texas Intermediate crude settled down 29 cents, or 0.6%, at $45.59 per barrel after plumbing a July 2017 low of $45.13 earlier in the day. For the week, it fell 11%, its steepest weekly fall since January 2016.
U.K. Brent was down 68 cents, or 1.3%, at $53.67 by 3:10 PM ET (20:10 GMT), after making a Sept 2017 low of $52.81 earlier. It was also down about 11% on the week.
Since it broke key technical support at $48 per barrel this week, WTI has been marked for a possible slide to below $40 per barrel before the year end .
With another four sessions left in the coming week, short-sellers could return after the Christmas break to try and tip U.S. crude into the $30s as fears of oversupply continue to rattle the market, particularly after Friday’s data showing 10 rigs being added this week, the most in six weeks.
“The end of 2018 could not be more different than the end of 2017,” Dominick Chirichella, director of risk and trading at the Energy Management Institute in New York, wrote on Friday in his final note for the year.
“The market has mostly concluded (for now) that the supply cuts from the latest OPEC accord are not likely to be deep enough to quell the surplus with global oil demand expected to slow,” Chirichella added.
Saudi-led OPEC and its non-member allies led by Russia pledged two weeks ago to cut a total of 1.2 million barrels per day of supply for six months beginning January to try and restore a global oil market that has been since October.
But crude prices have continued tumbling since the announcement by the enlarged OPEC+ group. Both WTI and Brent have tacked about 15% more in losses over the past two weeks, on track to finish the year about 40% lower.
In an attempt to try and improve their narrative, sources within OPEC released to The Wall Street Journal on Thursday documents revealing Saudi plans to curb its oil output by more than it committed two weeks back. The cartel would also be more transparent about its production going forth, the Journal reported.
Reuters, meanwhile, reported on Friday a letter by OPEC Secretary General Mohammad Barkindo that members should reduce output by 3.02%, higher than the originally agreed 2.5%.
Barkindo reportedly said that member countries would make their quotas public and applauded Saudi Arabia for pledging to reduce output in 10.2 million barrels per day, more than allocated.
The cartel is expected to publish the full list of supply cuts by the end of next week.
None of these have the stopped the bears’ stampede of the market as worries about relentless U.S. production and potential weakening of demand ahead of a possible global recession have had a bigger impact.
Fears of a partial shutdown of the U.S. government from Republicans-Democrats budget impasse over President Donald Trump’s long-standing plans to build a border wall added to the list of negatives on Friday.
“A government shutdown is raising fears of a crash, as worried investors scurry to cash,” said Phil Flynn, senior market analyst for energy at The Price Futures Group brokerage in Chicago.