Energy companies invested heavily in drilling over the past few years, when the price of oil was generally over $100 a barrel.
“While this is a clear sign that low prices will lead to less production, it was not enough to convince people”, Commerzbank senior oil analyst Carsten Fritsch said.
It pared some losses late in the trading session, as U.S. RBOB gasoline futures (RBc1) rebounded from a contract low, on news of a fire in a gasoline-making unit at PBF Energy Inc’s 182,000 barrels per day Delaware City, Delaware, refinery.
“The only silver lining we are seeing coming from the United States is that refining rates remain high and that crude production continues to fall”, Singapore-based Philip Futures said in a note to clients.
But output from the Organization of the Petroleum Exporting Countries was at roughly 31.5 million barrels a day during July, he said.
US banking giant Citigroup said WTI could fall to $32 a barrel, a level not seen since the throes of the financial crisis, pressured by excess supplies.
US crude oil fell towards $40 a barrel on Thursday after overnight data surprised analysts with a jump in US oil inventories.
“The market is stuck in a relentless downtrend”, said Robin Bieber, a director at London brokerage PVM Oil Associates. Meanwhile, concern that China’s economy will slow increases expectation that demand will wane.
To be sure, producers have brought down costs by securing price cuts from service providers and pioneering more efficient recovery methods, but they may still think twice about bringing new production on line, he said.
More Iranian oil is expected on the market when economic sanctions are lifted.
North Sea Brent was at US$48.54 (RM198) a barrel at 1345 GMT (9.45pm Malaysian time), down 20 cents but still some way from its 2015 low of US$45.19. The September contract expired Thursday after rising 34 cents to $41.14. It touched $39.86, the lowest level since March 2009.
The U.S. benchmark hit a 6-1/2 year low of $40.21 a barrel on Thursday.
U.S. oil prices fell sharply Wednesday after the U.S.
OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since worldwide sanctions were strengthened in 2012, according to the group’smonthly report. The weekly increase was the fifth in a row at a time investors fear that, even with oil trading around $40 a barrel, the domestic glut could worsen.