Oil futures slid for the sixth session in a row Friday, settling at their lowest level in nearly seven months and setting yet another new low for the year as macro-economic worries and weak supply-demand fundamentals weighed on the market.
The market was modestly lower most of the day but took a sharp dive with a half hour left in the trading session, falling as much as 1.6% before recovering slightly at the close. Light, sweet crude for June delivery settled down $1.08, or 1.2%, at $91.48 a barrel on the New York Mercantile Exchange, their lowest price since Oct. 26. Brent crude on the ICE futures exchange ended down 35 cents, or 0.3%, at $107.14 a barrel.
Oil spiked earlier this year on speculation of a supply disruption as tensions between the West and Iran mounted over its nuclear ambitions, but now that the air is clearing the market is pulling back to focus on more basic concerns. Uncertainty over financial conditions in Europe, with the downgrade of Spanish banks and continued questions over whether Greece will leave the euro zone, have combined with worries about growth and employment in the U.S. Domestic oil inventories hit a 22-year high according to data released earlier this week amid growing supplies and falling demand, and OPEC nations have been pumping more to compensate for the anticipated removal of Iranian supplies from the market when an embargo kicks in July 1.
Taken together, the trends paint a bearish picture for global oil fundamentals. Contract prices are now off 13.8% since May 1 and 17.3% off its high of the year set March 1, and analysts say the trend is likely to continue barring sudden new developments--with most seeing prices in the mid-$80s before long.
"Overall the run-up was a bubble I think with regard to Iran," said Stephen Schork, president of advisory firm The Schork Group. "As long as we don't get any headlines the trend is still your friend here."
Part of what is driving lower is the falling euro, which has strengthened the dollar and restored, at least in the near-term, the strong inverse correlation between oil and the dollar, sending oil prices lower.
"Whatever happens in the euro is going to dictate what happens in equity and commodity markets," said Brian LaRose, a technical analyst at brokerage ICAP. "If the euro can continue down, then I really see no hope for a bottom in equities or commodities."
Front-month June reformulated gasoline blendstock, or RBOB, settled up 0.4% to $2.8895 a gallon. June heating oil settled down 0.7% at $2.83 a gallon.