Oil headed for its biggest weekly loss since early March as signals from OPEC that it will persevere with output cuts failed to offset evidence that U.S. supplies are plentiful.
Front-month futures in New York are down 4.6 percent this week after a four-day selloff.
While a number of producing nations have reached an initial deal to extend supply curbs past June, according to Saudi Arabia’s energy minister, data showing rising U.S. output is prompting concern that those reductions will be undermined.
“We are once again seeing the emerging stalemate between OPEC and non-OPEC cutting efforts on one side and rising U.S. production on the other,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “We are currently testing the lower end of the range. This market is unlikely to go anywhere for the foreseeable future.”
Oil’s rally has faltered after three straight weekly gains on expectations the Organization of Petroleum Exporting Countries and its allies will extend its supply reductions. Prices dropped by more than 3.8 percent on Wednesday after data showed U.S. crude production rose for a ninth straight week, even as stockpiles continued to decline from a record.
West Texas Intermediate for June delivery was at $50.74 a barrel on the New York Mercantile Exchange, up 3 cents, at 1:37 p.m. in London. Total volume traded was about 42 percent below the 100-day average. The May contract expired Thursday down 17 cents at $50.27, the lowest close for front-month futures since April 3.
Brent for June settlement rose 9 cents to $53.08 a barrel on the London-based ICE Futures Europe exchange. Prices are down about 5 percent this week. The global benchmark crude traded at a premium of $2.34 to WTI.
Goldman Sachs Group Inc. said there’s no fundamental evidence in the oil market to justify the slide, which was driven by technical indicators.
“We view technicals rather than fundamentals as the driver of this move lower,” Goldman said in an April 20 report, referring to Wednesday’s drop. The U.S. inventory data released the same day was “in line with expectations,” and the slide accelerated as prices traded through their 50- and 100-day moving averages, the bank said.
Still, OPEC itself is voicing concern over the global glut it aims to ease. The group and other nations have failed after three months of curbs to achieve their target of reducing global inventories below the five-year historical average, Saudi Oil Minister Khalid Al-Falih said. OPEC will decide at a meeting on May 25 whether to prolong its pledged cuts into the second half.
© 2017 Bloomberg L.P