Oil Tumbles to Six-Year Low on OPEC Output, Yuan Move
Crude closed at the lowest level in more than six years in New York as OPEC production climbed while China’s devaluation of the yuan bolstered concern that the world’s second-biggest economy will slow.
West Texas Intermediate futures tumbled 4.2%. The Organization of Petroleum Exporting Countries raised output by 100,700 barrels a day to 31.5 million last month, the most since June 2012, the group said in its monthly report, citing external sources. The Chinese move may curb demand as import costs rise.
Gasoline futures were little changed as the unexpected shutdown of refinery units in New Jersey and Indiana raised the prospect of lower supplies in New York and Chicago.
Oil has dropped more than 25% since this year’s peak closing price in June on concern the global surplus that drove crude into a bear market will persist. In July, the Bloomberg News Commodity Index of 22 raw materials capped the biggest monthly drop since 2011 on faltering Chinese demand and ample supply.
“The Chinese news just adds to concerns we already had,” Rob Haworth, a senior investment strategist in Seattle at U.S.
Bank Wealth Management, which oversees $128 billion of assets, said by phone, “Nobody is excited about the prospects for demand growth, and excess supply isn’t going away. Prices will probably drop below $40 before this is over.”
WTI for September delivery fell $1.88 to $43.08 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 2009. The contract touched $42.69, the lowest intraday price since March 18. The volume of all futures traded was 76% higher than the 100-day average at 2:52 p.m.
Brent for September settlement dropped $1.23, or 2.4%, to end the session at $49.18 a barrel on the London- based ICE Futures Europe exchange. The European benchmark crude closed at a $6.10 premium to WTI.
Iran increased output by 32,300 barrels a day in July to 2.86 million a day, the highest since June 2012, according to data OPEC compiles from “secondary sources.”
China cut the yuan’s reference rate by the most in two decades, allowing depreciation to combat a slump in exports. The devaluation ends a de facto peg to the dollar that’s been in place since March and battered exports. The change was a one-time adjustment, the People’s Bank of China said in a statement, adding that it plans to keep the currency stable at a “reasonable” level and will strengthen the market’s role in determining the fixing.
“The surge in supply is unrelenting,” John Kilduff, a partner at Again Capital, a New York-based hedge fund, said by phone. “The move by China is shaking up all the markets. It is further evidence of how the economy is performing and how much that worries the central planners.”
U.S. crude supplies probably slipped 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Aug. 12. Shale output will fall for a fifth straight month in September, EIA projected in a separate report Aug. 8.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably climbed last week while supplies of gasoline dropped, according to the survey.
BP's Whiting, Indiana, refinery shut the largest of three crude units over the weekend. The unit will be shut at least a month, and other portions of the facility will run at reduced rates, a person familiar with operations said. Gasoline output at Phillips 66’s Bayway, New Jersey, will be cut for up to two weeks after a unit shut Aug. 7, a source familiar with operations said.
Gasoline futures declined 0.03 cent to settle at $1.6937 a gallon. Diesel decreased 2.92 cents, or 1.8%, to close at $1.5629.
Regular gasoline at U.S. pumps fell to the lowest level since April. The average retail price slipped 1.2 cents to $2.579 a gallon Aug. 10, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.
