By Neanda Salvaterra and Alison Sider
Oil prices slid for a sixth straight day as investors continue to worry about a surge in U.S. production and this week's selloff in equity markets.
Crude futures shot out of the gate at the beginning of the year, rising to more than three year highs in January. But they have given up just about all of those gains as swirling fears have bled from the stock market to commodities as and as investors have focused on the unrelenting rise in U.S. production.
U.S. crude futures recently traded down 74 cents, or 1.21%, to $60.41 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 83 cents, or 1.28%, to $63.98 a barrel on ICE Futures Europe.
A confluence of bearish factors has started to weigh on oil prices, said John Macaluso, a trader at Tyche Capital Advisors, said of U.S. crude prices.
"We're definitely watching for it to fall below $60," he said.
And investors who amassed record large net bullish positions on prices are starting to give up.
Crude has edged down because of "the profit-taking from investors who propped up prices to over $70 dollar Brent over the last month," said Eugen Weinberg, head of commodities research at Commerzbank. "The timing probably has something to do with over speculation and an overheated market, but fundamentally things are going to head down from here."
Until recently, oil prices have been buoyed by strong demand coupled with production cuts from the Organization of the Petroleum Exporting Countries and other large producers among other threats to supply.
Now the market fundamentals are changing as recent increases in prices brings more oil out of U.S., some analysts say.
Last year investors where lulled into complacency that "this time it is different" and American producers won't ramp up output, said Olivier Jakob, managing director of Petromatrix. But that narrative proved to be false.
"U.S. producers have reacted in style to the rising oil prices and have accelerated the pace of growth of U.S. crude oil production," said Mr. Jakob.
The U.S. Energy Information Administration is now expecting output to average 10.6 million barrels a day this year -- up from its previous forecast of 10.3 million barrels a day. And the agency reported that production has already surged to 10.25 million barrels a day.
The downturn in the oil market is also coming amid a selloff in the equity markets, as investors there fret about the potential for higher inflation and central bank action. Stocks in Europe and Asia were on pace Friday for their worst week in two years after a late slump Thursday pushed the Dow Jones Industrial Average and S&P 500 into correction territory.
But even as stock indexes rose Friday, oil has suffered as more speculative investors sell out of bets that crude prices will continue to edge up.
Analysts will see just how far this has happened later Friday, with the publication of net speculative positions from the London's ICE Futures exchange and other major exchanges.
Also later Friday, Baker Hughes Inc. is set to release its weekly data on the number of rigs drilling for oil in the U.S., a bellwether for activity in the sector.
Gasoline futures fell 3.23 cents, or 1.66%, to $1.9079 a gallon. Diesel futures fell 3.81 cents, or 1.21%, to $60.41 a barrel.
Write to Neanda Salvaterra at firstname.lastname@example.org and Alison Sider at email@example.com