Oil hits two-month low on glut fears, technical selling

Mon Jul 11, 2016 7:05pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell more than 1 percent on Monday, hitting two-month lows on extended selling after the market's break below a key technical support level last week due to oversupply fears.

The market last week slumped nearly 8 percent in its biggest weekly losses in six months and already hit a two-month low on Thursday after disappointing drawdowns in U.S. crude and gasoline inventories pointed toward weak demand. [EIA/S]

The rising U.S. oil drilling rig count and cuts in bullish hedge fund bets on crude to four-month lows also added to the hard fall in prices. [RIG/U]

"We have shifted to a bearish trading stance and off a neutral posture that we had maintained for approximately a month following transition from a bullish view in early June," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Brent crude futures LCOc1 settled down 51 cents, or 1.1 percent, at $46.25 per barrel. The session low was $45.90, the lowest since May 11.

U.S. crude's West Texas Intermediate (WTI) futures CLc1 slipped 65 cents, or 1.4 percent, to settle at $44.76 a barrel.

Both benchmarks fell further in post-settlement trade, with WTI sliding 2 percent to a fresh two-month low of $44.42 on the back of the thinnest trading volume in five sessions.

"We have suggested the likelihood of a price downdraft in WTI and Brent to about $37 and $38 areas, respectively," Ritterbusch said, adding that the move lower could be volatile, however, with occasional rallies of $1 to $2 a barrel.   Continued...

Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin