Crude oil prices plunged Thursday to their lowest level since April, with oil-related exchange traded funds breaking below their long-term trend lines.
On Thursday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, declined 2.4% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, decreased 2.8%.
USO broke below its long-term trend line at the 200-day simple moving average while BNO was testing its long-term support.
Meanwhile, WTI crude oil futures were 2.7% lower to $63.5 per barrel and Brent crude was down 3.1% to $72.8 per barrel.
Weighing on crude prices, the Energy Information Administration revealed that U.S. oil stockpiles rose a sixth consecutive week by 3.2 million barrels to 426 million, its highest level since June, the Wall Street Journal reports.
Oil Output Analysis
Further exacerbating the selling, the EIA published monthly production that showed August output jumped by 2.1 million barrels per day year-over-year to a record 1.3 million barrels per day.
“U.S. oil production in August far exceeded expectations, potentially indicating a more than adequately supplied market,” according to Simmons & Co.
Related: Top 34 Oil ETFs
The energy market has already been under pressure in recent weeks after Saudis’ oil minister Khalid al-Falih hinted that the kingdom could meet any demand that materializes and the Organization of Petroleum Exporting Countries could increase production to cap higher crude oil prices.
“With those statements, al-Falih caused Iran supply disruption fears to go away and prices collapsed,” Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management, told the WSJ.
The U.S. is set to implement sanctions on Iran’s oil industry at the start of next week.
The realized loss of Iranian exports will become more evident by the beginning of next year,” given ships loaded in October will still be delivering their cargoes over the coming weeks, Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told the WSJ.
For more information on the energy sector, visit our energy category.