Don’t look down.

Brent crude has entered a new bear market, dropping towards $42 a barrel for the first time since April, as concerns about the ongoing oil glut continue to hammer prices, reports David Sheppard, deputy commodities editor.

Since hitting a year high of $52.86 in June Brent has now fallen by more than 20 per cent – the common definition of a bear market – spreading fears for oil companies and major producing countries that had hoped the worst of the two-year rout had passed.

On Friday, Brent moved below its 200-day moving average, a key indicator of sentiment for traders.

The latest slide comes as energy traders have started storing more crude off the UK coast, parking as much as two weeks worth of UK production on supertankers as they struggle to find buyers and see more profitable opportunities in holding the oil.

Demand from refiners has slipped after they produced too much gasoline in the first half of the year, transferring the crude glut into the refined product market and hitting their own profit margins.

But there are signs that the oil market has made progress since prices slipped to a 13-year low below $30 a barrel at the start of this year. Global crude oil inventories have started to slowly draw, and forecasts remain for the market to come closer to balance next year.

Goldman Sachs, traditionally one of the most bearish voices in the oil market, weighed in on Friday, arguing that while the recovery is “fragile” it is continuing.

They blamed strength in the dollar for some of the weakness in dollar-priced commodities like crude. The dollar index is up 6 per cent since May.

Goldman analysts said in a note:

The improvement in oil fundamentals remains fragile and continues to feature large offsetting forces: wildfires have helped offset surprisingly strong Iran production, slowing demand growth in India and China in 2H16 will help offset production issues in Nigeria and Venezuela and finally product builds have offset crude draws.

The resulting uncertainties on the near-term path of the oil market rebalancing have left the US dollar as the primary driver to lower crude oil prices recently. Beyond these near-term uncertainties, however, our updated supply-demand balance is little changed and continues to point to a slow rebalancing of the global oil market over the coming year.