Brent Oil Falls Below $45 for First Time Since 2009 on Supplies

Iran Oil

Crude in London slid below $45 a barrel for the first time since March 2009 on concerns Chinese demand is slowing just as Iran and the U.S. threaten to expand a global glut.

Brent oil fell as much as 6.5 percent, extending a 7.3 percent drop last week that was the biggest in five months. Commodities sank to the lowest in 16 years as forecasts for the weakest Chinese growth since 1990 spurred investors to seek out the safest assets. U.S. energy companies declined as much as 6 percent on the Standard & Poor’s 500 index. Losses eased after equities pulled back from the brink of a correction.

Iran’s Oil Minister Bijan Namdar Zanganeh vowed to expand output “at any cost,” according to the ministry’s news website. The number of active oil rigs in the U.S. rose for the seventh time in eight weeks, data showed Friday.

Oil’s worsening global surplus has driven prices down by more than 30 percent since May. Iran aims to expand its share of output in the Organization of Petroleum Exporting Countries while U.S. crude supplies are almost 100 million barrels above the five-year seasonal average.

“We’re trading at 6 1/2 year lows and have further to go,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “The risk-off scenario continues to play out. The statements from the Iranian oil minister about fighting for market share didn’t help.”

Commodity Rout

Brent for October settlement declined $1.80, or 4 percent, to $43.66 a barrel on the London-based ICE Futures Europe exchange at 12:51 p.m. New York time. Futures touched $42.51, the lowest since March 12, 2009. Brent oil traded at a $4.67 premium to West Texas Intermediate, the U.S. benchmark.

 

WTI for October delivery dropped $1.46, or 3.6 percent, to $38.99 a barrel on the New York Mercantile Exchange. It reached $37.75, the lowest since Feb. 24, 2009. Prices have decreased the past eight weeks, the longest retreat since 1986. Total volume was 43 percent above the 100-day average.

The Bloomberg Commodity Index of 22 raw materials fell as much as 3 percent to the lowest level since August 1999 as China’s economic slowdown exacerbated surpluses from oil to metals. The index is a measure of returns that takes into account the loss or gain from holding futures contracts as well as the performance of the underlying commodities.

Crude’s slump triggered losses in related equities. Oil and natural gas producers plunged to the lowest in almost four years amid the wave of selling. An index of 40 energy explorers dropped as much as 6 percent on Monday for the steepest intraday decline since November. Exxon Mobil Corp., the largest U.S energy producer, fell as much as 7.7 percent to $66.55 a share, the lowest since October 2010.

Iranian Strategy

Iran was OPEC’s second-largest producer before sanctions over its nuclear program were tightened in mid-2012. The nation will seek to regain oil sales regardless of price, Zanganeh said last month after negotiators reached a deal with world powers easing economic curbs.

OPEC has pumped above its quota of 30 million barrels a day for more than a year, according to data compiled by Bloomberg. Saudi Arabia and Iraq were the group’s top producers in July.

“We’re about 1.5 million barrels a day oversupplied right now,” Paul Sankey, an energy analyst at Wolfe Research LLC, said on Bloomberg Radio. The Saudis would have made cuts to balance the market in the past but now “they are worried about Iran.”

In the U.S., rigs drilling for oil climbed by 2 to 674 last week, according to Baker Hughes, an oilfield-services company. That’s the highest level since May 1.

Speculator Bets

Hedge funds cut bullish bets on WTI to the lowest level in five years in the week ended Aug. 18, U.S. Commodity Futures Trading Commission data show. Money managers raised their bullish Brent wagers during the same period by 13,977 contracts, according to data from ICE.

“We could have a bit more downside here, especially given the macro picture,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone. “We’re very short, so the end of the correction may be near.”

September gasoline futures tumbled 5.59 cents, or 3.6 percent, to $1.489 a gallon, after touching a six-month low of $1.467. Diesel for September delivery fell 3.82 cents, or 2.6 percent, to $1.4242, after reaching $1.3972, the least since May 2009.