Oil prices Monday skidded to their biggest single-day declines in more than three months, as gyrations in Chinese stocks and the prospect of more crude from the U.S. and Iran revived worries about the global supply glut.
China’s stock markets have plunged in recent weeks, which sparked worries among investors about oil demand in the world’s second-largest consumer. Diplomats are trying to hammer out a final deal on Iran’s nuclear program at the same time Iranian officials have signaled they want to export even more crude than traders had expected.
These concerns are coming to the fore on the heels of data showing the first rise in the number of rigs drilling for oil since December.
“All signs point south for oil prices,” analysts at Capital Economics wrote in a note Monday.
The U.S. benchmark oil price slid for the third trading session in a row, closing down $4.38, or 7.7 percent, to $52.53 a barrel on the New York Mercantile Exchange.
Capital Economics lowered its year-end price forecast by more than 8 percent, it said in its note.
That puts U.S. oil at $50 a barrel to end 2015 and Brent at $55.
For two months, oil prices had remained relatively stable at around $60 a barrel, and their breakaway from that area means the sell-off is likely to deepen, said Mark Waggoner, president of brokerage Excel Futures.
Oil is likely to slip just below $50 a barrel, the last cost area where it stabilized back in February, Waggoner said.
Iranian exports and the resilience of U.S. producers make it increasingly unlikely that bulls will see the production declines they expected, he added.
