Oil sinks to $40, logs longest weekly losing streak in 29 years

Has Crude Hit Bottom?

U.S. oil prices dived again on Friday, threatening to dip below $40 a barrel for the first time since the financial crisis and notching their longest weekly losing streak since 1986, as a drop in Chinese manufacturing rattled global markets.

World stock and currency markets joined an extended rout across raw materials this week, a slump accelerated on Friday by data showing activity in China's factory sector shrank at its fastest pace in almost 6-1/2 years in August.

SEE MORE: US stock market wavers; Wal-Mart sinks

With deepening gloom over demand growth from the world's second-biggest oil user, and expectations for a significant build-up in surplus oil stocks this autumn, dealers said most oil traders were unwilling to fight the tide.

"The market is stuck in a relentless downtrend," said Robin Bieber, a director at London brokerage PVM Oil Associates.

"The trend is down - stick with it."

U.S. October crude CLc1 fell $1.02, or 2.5 percent, to $40.29 a barrel by 11:22 a.m. EDT, having touched a new 6-1/2-year low of $40.11 a barrel earlier. Front-month U.S. crude has fallen 33 percent over eight consecutive weeks of losses, the longest such losing streak since 1986.

Brent oil LCOc1 fell $1.28, or 2.75 percent, to $45.33 a barrel, threatening to break below $45 a barrel for the first time since March 2009.

The U.S. S&P .SPX fell about 2 percent on Friday and is down over 4 percent for the week, its worst weekly decline in at least three years. The dollar .DXY also fell, lending a small measure of support to oil prices but also suggesting a lowering of expectations of a U.S. interest rate hike in September. [MKTS/GLOB]

In late 1985, oil prices slumped to $10 a barrel from around $30 over five months as OPEC raised output to regain market share following an increase in non-OPEC production.

Although the current collapse in oil prices, the second this year, has raised alarm within the Organization of the Petroleum Exporting Countries (OPEC), including some of its core Gulf members, there is no indication they will reverse their policy of keeping production wide open to defend market share, delegates told Reuters this week.

As a result, oil traders are looking for further signs of a slowdown in U.S. production to put a floor under the market. U.S. rig data due later on Friday will show whether oil drillers stepped up activity for a fifth straight week, which could signal unexpectedly stronger output in the coming months. [RIG/U]

(Additional reporting by Christopher Johnson in London and Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson, William Hardy and Paul Simao)

Expert: Oil Is Facing a 'Problem of Plenty':

Oil Is Facing a 'Problem of Plenty': Expert

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