Oil capped its biggest monthly stop by almost seven years on speculation that increased OPEC supplies and threats to demand in China will prolong a global glut.
West Texas Intermediate oil slid 2.9 percent Friday, bringing the monthly drop to 21 percent. U.S. crude stockpiles are almost 100 million barrels above the five-year seasonal average, while exports from southern Iraq rose to a record this month. Falling costs are weighing on Exxon Mobil Corp. and Chevron Corp., the biggest U.S. energy producers, which posted their worst quarterly performances in a number of years Friday.
WTI crude\’s worst month since October 2008 belongs to a slump across raw materials amid expanding surpluses and concern that slower economic growth in China will crimp demand. Commodities also fell as the dollar gained on signs that the Federal Reserve may raise rates, curbing their appeal. Sanctions on oil exports from Iran, which supports the world\’s fourth-biggest crude reserves, may be lifted after a nuclear accord on July 14.
\”July has been a massacre,\” Phil Flynn, senior market analyst for Price Futures Group Inc., said by phone from Chicago. \”It wasn\’t just oil, commodities as an asset class got crushed. It was mostly due to expectations the Fed will raise rates, which sent the dollar higher, and concerns about China.\”
WTI for September delivery fell $1.40 to shut at $47.12 a barrel around the New York Mercantile Exchange. It was the lowest settlement since March 20. Total volume was 31 percent below the 100-day average for the time of day. Prices have lost more than 20 % from their closing peak this season on June 10, meeting a typical definition of a bear market.
Brent for September settlement slipped $1.10, or 2.1 percent, to end the session at $52.21 a barrel around the London- based ICE Futures Europe exchange. Prices dropped 18 percent this month, the largest decline since December. The European benchmark crude closed at a $5.09 premium to WTI.
Futures briefly advanced earlier as the dollar tumbled on speculation slow U.S. wage growth will temper Federal Reserve plans for higher interest rates. The Bloomberg Dollar Index dropped around 1 percent. A weaker U.S. currency makes commodities denominated within the greenback more attractive as a store of value.
\”A big drop in the dollar always means major support for commodities,\” John Kilduff, someone at Again Capital LLC, a New York-based hedge fund, said by telephone. \”Any support will be temporary because the bearish factors which have weighed on prices this month remain greatly in place.\”