Futures were on track for a sixth straight day of losses, wiping away the year’s gains in a string of high-volume trading sessions, pressured by stronger-than-expected supply figures and a surprising ramp-up of the North Sea Forties Pipeline, which shut earlier in the week.
Oil services company Baker Hughes said total US onshore rigs rose by 26 to 791, highest since January 2017. Drillers have added rigs as oil prices rallied through mid-January to levels not seen in three years.
US West Texas Intermediate (WTI) crude was down $2.28, or 3.7 percent, at $58.89 as of 1:23 p.m. EST (1823 GMT), lowest since Dec. 26.
Brent futures fell $2.28 a barrel, or 3.5 percent to $62.53 a barrel, its lowest since Dec. 14.
“Oil futures really came under pressure especially when they crossed $60; it really seemed like traders started to liquidate,” said Philip Streible, futures broker at RJO Futures in Chicago.
The market has been increasingly pressured by the weak stock market. Also, oil is inversely correlated with the dollar, which has strengthened as equity markets slid. The S&P 500 stock index fell to its lowest level since Oct. 5.
US and Brent crude futures have slid more than 11 percent from this year’s peak in late January. Brent was heading for a weekly loss of nearly 9 percent; US crude was on track for a 10 percent weekly drop. Both would be the biggest weekly declines since January 2016.
Crude volumes in the North Sea Forties pipeline continued to ramp up faster than expected following a restart, a trade source told Reuters.
The news that the line will reach full rates over the weekend intensified oversupply worries, said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
“The idea that it is back up and running normally, combined with the data that show US production is rising, contributes to the overall idea that US production could offset cuts by OPEC,” said McGillian.
Investors were already worried that rising US production will overwhelm efforts by OPEC and other producing nations to cut supply. US output rose to 10.25 million bpd in the most recent weekly figures, which if confirmed would represent a record. The Baker Hughes figures should mean still more supply in coming months.
On Thursday, OPEC member Iran announced plans to boost production within the next four years by at least 700,000 barrels a day.
“We think that surging supply and slowing demand growth will tip the market back into a surplus this year,” analysts at Capital Economics said in a note.