Brent crude dropped below $55 a barrel for the first time in more than three months while U.S. prices traded in a bear market amid a persisting surplus.

Brent lost as much as 0.9 percent in London. West Texas Intermediate was steady after closing on Thursday more than 20 percent below the peak reached in June, meeting the common definition of a bear market. U.S. crude supplies remain almost 100 million barrels above the five-year average after an unexpected increase through July 17, government data showed Wednesday. A private gauge of Chinese manufacturing unexpectedly fell to the lowest in 15 months.

Oil’s rebound from a six-year low in March has faltered on signs a global surplus will persist. Prices have been swept up in a broad selloff of raw materials, which have fallen to a 13- year low amid concerns that economic growth will stagnate in China, the biggest consumer of energy, metals and grains.

“The surprise increase in U.S. inventories and the disappointing Chinese PMI this week are taking their toll.” Jens Pedersen, a Copenhagen-based commodities analyst at Danske Bank A/S, said by e-mail. “It will likely take an improved outlook for global economic growth to help oil prices from here,”

Brent for September settlement dropped as much as 47 cents to $54.80 a barrel on the London-based ICE Futures Europe exchange, and traded at $54.93 at 10:44 a.m. local time. It last traded below $55 on April 2. The European benchmark crude was at a premium of $6.36 to WTI.

U.S. Supplies

WTI for September delivery rose 20 cents to $48.65 a barrel in electronic trading on the New York Mercantile Exchange. The contract slid 74 cents to $48.45 on Thursday. Prices are heading for a fourth weekly decrease, the longest slump since March. The volume of all futures traded was about 30 percent below the 100- day average.

The Chicago Board Options Exchange Crude Oil Volatility Index, a measure of price fluctuations closed at 38.46 on Thursday, the highest level since July 10. The gauge of hedging costs on the U.S. Oil Fund, the largest exchange-traded fund tracking WTI futures, is heading for the third weekly gain in four weeks.

U.S. crude stockpiles expanded by 2.47 million barrels to 463.9 million last week, Energy Information Administration data showed, compared with a forecast in a Bloomberg survey for supplies to drop by 2.2 million. The nation is producing near the fastest rate in three decades.

Commodities Outlook

Average prices for fuels such as crude, natural gas and coal this year will tumble 39 percent from 2014, the World Bank said this week in its quarterly commodities outlook. Large oil inventories and rising output from the Organization of Petroleum Exporting Countries suggest prices will remain weak in the medium term, according to John Baffes, the report’s main author.

A private gauge of Chinese manufacturing fell in July to the lowest in 15 months compared with estimates for a gain in a Bloomberg survey. The Bloomberg Commodity Index of 22 raw materials extended its decline to a 13-year low on Friday and is set for a third weekly loss.

Source: www.bloomberg.com

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