Oil dropped below US$50 per barrel as investors lost faith that an extension of OPEC-led supply cuts will overcome growing US production and ease a global glut.
Front-month futures in New York fell 6.7 percent this week, the biggest loss since early last month.
While a number of exporters have reached an initial deal to extend the curbs past June, rising US output is raising concern that those cuts will be undermined, Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid al-Falih said.
OPEC and its allies have failed after three months of cuts to meet their goal of reducing global supplies below the five-year historical average, al-Falih said.
Oil’s rally has faltered after three straight weekly gains on expectations OPEC and its allies will extend its supply reductions.
On Wednesday, prices dropped 3.8 percent after government data showed US production rose for a ninth straight week, even as stockpiles continued to decline.
US explorers this week added five oil rigs to cap the longest stretch of gains since 2011, Baker Hughes Inc data showed.
“The drumbeat of bearish data continues to put pressure on the market,” said Michael Cohen, head of energy commodities research at Barclays PLC in New York. “The bulls don’t have much of a leg to stand on now.”
West Texas Intermediate (WTI) for June delivery on Friday dropped US$1.09, or 2.2 percent, to US$49.62 per barrel on the New York Mercantile Exchange. It is the lowest close since March 29. The contract is down 6.7 percent from last week’s US$53.18 per barrel. Total volume traded was about 8 percent above the 100-day average.
Brent for June settlement on Friday declined US$1.03, or 1.9 percent, to US$51.96 per barrel on the London-based ICE Futures Europe exchange. Prices fell 7 percent this week. The global benchmark crude closed at a US$2.34 premium to WTI.
Goldman Sachs Group Inc said there is no fundamental evidence to justify this week’s sell-off.
The bank finds the drop in US crude supplies encouraging and expects the declines to accelerate through the second quarter amid OPEC cuts and demand growth, analysts, including Damien Courvalin and Jeffrey Currie, said in a report.
Meanwhile, a mid-week slide was driven by oil trading through its 50-day and 100-day moving averages, Goldman said.
Gulf Cooperation Council (GCC) countries agreed to push for an extension to the OPEC-led cuts in a meeting on Wednesday, Oman Minister of Oil and Gas Mohammed Al Rumhy said in an interview in Abu Dhabi.
The GCC comprises OPEC members Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, as well as Oman and Bahrain. GCC states are participating in the current deal to cap output.
A meeting of a technical committee of OPEC and non-OPEC countries in Vienna concluded that a six-month extension of production cuts would be necessary, two delegates with knowledge of the matter said.
The committee concluded that combined OPEC and non-OPEC compliance with the accord was 98 percent last month, an improvement from February, one delegate said.
OPEC is to decide at a meeting on May 25 whether to prolong its pledged cuts into the second half of the year.
“It all comes down to whether OPEC can deliver inventory cuts,” Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis, said by telephone. “So far we haven’t seen a lot of evidence that they’re succeeding.”
Oil market news:
‧ Exxon Mobil Corp is not to be allowed to bypass US sanctions against Russia to resume drilling for oil in a joint venture that seeks to tap billions of barrels of that country’s crude.
‧ Russia has cut production by 250,000 barrels per day since October last year and will reach the 300,000 barrel per day decline it committed to in an accord with OPEC and other exporters, Russian Minister of Energy Alexander Novak said.
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