U.S. crude tumbled below $40 per barrel for the first time since April as oil prices fell nearly 4 percent on Monday on heightened worries of a crude despite peak summer fuel demand.
A 15-percent slump in U.S. crude prices in July, the worst monthly loss in a year, also triggered liquidation as trading began for August.
Monday’s slide in crude prices also came after Marathon Petroleum unexpectedly shut its lone crude unit and an associated unit at its 212,000 barrel-per-day refinery in Robinson, Illinois, at the weekend, according to a source. The cause and duration of the outage were not clear.
“It’s stop-loss technical selling combined with sheer liquidation by those fearing we’ll soon be swimming in oil again,” said Phil Davis, trader at PSW Investments in San Diego, California. “We’ve had crude builds during the summer, when we were supposed to be having runaway draws from record driving.”
U.S. West Texas intermediate (WTI) crude plumbed $39.86, its lowest since April 20, and by 1:30 p.m. EDT (1730 GMT) was trading $1.52, or 3.7 percent, lower at $40.08.
Brent crude was down $1.45, or 3.3 percent, at $42.08 a barrel, after a session low at $41.87.
A Reuters survey on Friday found that output from the Organization of the Petroleum Exporting Countries likely rose in July to its highest in recent history as Iraq pumped more and Nigeria squeezed out additional crude exports despite militant attacks on oil installations.
Top OPEC exporter Saudi Arabia also kept output close to a record high, the survey found, as it met seasonally higher domestic demand and focused on maintaining market share instead of trimming supply to boost prices.
Other data on Friday showed the United States added 44 new oil drilling rigs in July, the most for a month in two years, intensifying concerns that global production could once again get to unmanageable levels like in 2014-2015.
Crude prices remain nearly 55 percent above 12-year lows of $26 to $27 hit in the first quarter.
But WTI and Brent have also slipped into bear market territory since last week after losing more than 20 percent from 2016 highs above $50 hit in June.
Hedge funds slashed their positive bets on U.S. crude to a five-month low during the week to July 26, while holding a record net short, or bearish position, on gasoline, data showed on Friday.
Barclays noted that Brent averaged $46.50 a barrel so far into the third quarter and could fall further.
“With the macroeconomic picture worsening and Saudi Arabia unlikely to exhibit much restraint as Iran seeks incremental market share, refineries are going to find themselves in the line of fire,” the British bank said in a research note.
Iran’s oil minister concurred the market was oversupplied but said balance between supply and demand will be restored, Iranian state television reported.