WASHINGTON (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures eroded further Thursday afternoon. Both benchmarks fell nearly 3% amid technical selling and weakness in U.S. equities, while concerns of oversupplied markets continue to underpin the bearish sentiment.
NYMEX August West Texas Intermediate plunged $1.48 to settle at $55.30 barrel (bbl), while ICE September Brent crude collapsed $1.73 to $61.93.
NYMEX August RBOB futures tumbled 4.45cts or 2.55% to settle at $1.8342 gallon, a nearly four-week low. NYMEX August ULSD futures were down 3.01cts at $1.8625 gallon settlement.
Benchmark crude oil futures settled at four-week lows Thursday afternoon on a set of factors, including heightened concerns over decelerating fuel demand and a quick recovery of Gulf of Mexico crude production following Hurricane Barry. WTI also broke through a retracement below $57 bbl in the early afternoon, which triggered heavy selling in the oil complex through the end of the session. Traders seemingly rushed to exit positions after government data showed only about 19% of the current oil production in the Gulf of Mexico remains shut, which compares with 58% just two days ago. The Bureau of Safety and Environmental Enforcement Thursday afternoon reported operators in the region quickly returning personnel back to the platforms, with only 60 of production platforms remaining unmanned versus a total of 171 on Tuesday.
The market's retreat came following losses Wednesday on Energy Information Administration data showing large builds in gasoline and distillate stocks in the week ended July 12. EIA data also detailed a smaller-than-expected decline in crude oil inventories. The report also pointed to lower U.S. demand for gasoline at a time when global economy continues to weaken. The bearish report and recent downward revisions in demand forecasts from International Energy Agency and Organization of the Petroleum Exporting Countries, highlight oversupply concerns.
Thursday's session started off higher after overnight reports that Iran seized a foreign oil tanker accused of smuggling fuels in the Persian Gulf. Shipping industry participants believe the unidentified vessel is MT Riah based in the United Arab Emirates, which disappeared off trackers in Iranian territorial waters on Sunday, July 14. Following the incident, U.S. military command in the region said the U.S. would work "aggressively" to ensure freedom of navigation in the Gulf, while the White House is preparing to send an additional 500 military personal to the region. Tehran has previously threatened to disrupt oil shipment through the Strait of Hormuz -- the world's vital chokepoint for oil transit. Unlike other channels, the Strait of Hormuz has very limited options for a bypass and serves as a gateway for roughly 21% of global petroleum supply. Since mid-May, the Gulf region has been shaken by a series of attacks on oil tankers, spurring investors' fears of a major disruption to the oil transit from the Middle East.
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