Updated Jan. 15, 2016 6:14 a.m. ET
Oil prices tumbled below $30 a barrel on Friday, with U.S. crude dropping around 5% as continued turmoil in Chinese markets and concerns over Iranian supplies adding to the global glut took their toll on the market.
Oil has shed about a fifth of its value since the beginning of this year on growing fears about the health of the Chinese economy, the world’s second-biggest oil-consumer.
Carlos Garcia Rawlins/Reuters
Brent crude for March delivery, the global oil benchmark, fell 3.6% to $29.76 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures for February were trading down 5% at $29.64 a barrel.
China’s main stock benchmark entered a bear market Friday, with the Shanghai Composite Index falling 3.6%. The index has fallen 20% from its recent high, the definition of a bear market, reached on Dec. 22.
China consumes about 12% of the world’s crude, second only to the U.S. A string of weak manufacturing data in recent months has fueled fears that an economic slowdown in the Asian giant will affect its appetite for crude. While China’s oil demand held up last year, it is starting to show signs of slowing, with demand expected to grow by about 300,000 barrels a day, versus 510,000 last year, according to Barclays.
“China has been a key pillar of demand for years and if you take that out, things aren’t looking good for crude,” Mr. Deshpande said.
On Friday, the United Nations’ International Atomic Energy Agency is expected to issue a report on Iran’s nuclear program which could pave the way for the lifting of the sanctions against Tehran.
Analysts say that this is likely to lead to a surge of Iranian oil exports and add to the already oversupplied global market. Iranian officials have said the country is looking to add about 500,000 barrels within weeks of the sanctions relief.
Amid the continuing weakness in oil prices, analysts have been sharply cutting their forecasts in recent weeks.
Investment bank Jefferies slashed its Brent price forecast by 30% to $43 a barrel, from a previous projection of $61 a barrel. It also cut its 2017 forecast by 21% to $58 a barrel and its 2018 forecast by 11% to $72 a barrel.
Nymex reformulated gasoline blendstock—the benchmark gasoline contract—fell 2.3% to $1.04 a gallon. ICE gas oil changed hands at $279.75 a metric ton, down $3.50 from the previous settlement.
—Biman Mukherji contributed to this article.
Write to Georgi Kantchev at [email protected]
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