NEW YORK (Bloomberg) -- Oil plunged below $40/bbl in New York for the first time in more than six years on signs the supply glut will be prolonged.

 

Prices have tumbled almost 35% since this year’s peak in June as producers maintain output even after an oversupply pushed prices into a bear market. WTI could drop to $32 on the persisting global surplus, Citigroup Inc. said in a report Aug. 19. Concerns that China’s economic growth will reduce demand also weighed on futures.

 

“It’s clear that the major producers, the Saudis, Russians, the U.S. and others, are battling for market share,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone.

 

West Texas Intermediate for October delivery dropped $1.20, or 2.9%, to $39.94/bbl at 1:03 p.m. on the New York Mercantile Exchange.

 

The U.S. Energy Information Administration said crude supplies rose 2.62 MMbbl last week. The unexpected U.S. inventory gain followed signs that OPEC members are planning to boost production. A Chinese manufacturing gauge sank to the lowest level since the financial crisis, increasing concern that demand will wane in the world’s second-largest oil consumer.

 

Brent for October settlement fell 3% to $45.21/bbl on the London-based ICE Futures Europe exchange.

 

Market Balance

 

Oil balances point to further oversupply throughout 2015, “begging the question how low can oil go?” Citigroup analysts led by Seth Kleinman said in the note.

 

“Eventually, supply and demand will come into balance, but it will take a while,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone.

 

U.S. crude inventories rose to 456.2 MMbbl in the week ended Aug. 14, almost 100 million above the five-year average. The nation’s output climbed 8.8% from a year earlier to 9.52 MMbopd in July, highest for the month since at least 1920, the industry-funded American Petroleum Institute said Thursday.

 

The Organization of Petroleum Exporting Countries has pumped above its 30 MMbopd quota for more than a year, according to data compiled by Bloomberg.

 

Saudi Arabia told OPEC its June production was a record, exceeding a previous all-time high set in 1980.

 

Angola plans to ship 1.83 MMbopd in October, the most since November 2011, according to a preliminary loading program obtained by Bloomberg.