New York: Oil dropped below $50 (Dh183.50) a barrel as growing US crude production hinders Opec-led efforts to ease a global supply glut.
Front-month futures in New York are down more than 6 per cent this week. While a number of exporters have reached an initial deal to extend the curbs past June, according to Saudi Arabian Oil Minister Khalid Al Falih, data showing rising US output is raising concern that those cuts will be undermined. Opec and its allies have failed after three months of cuts to achieve their target of trimming global supplies below the five-year historical average, Al Falih said.
“The drumbeat of bearish data continues to put pressure on the market,” 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.”
Oil’s rally has faltered after three straight weekly gains on expectations the Organisation of Petroleum Exporting Countries and its allies will extend its supply reductions. Prices dropped 3.8 per cent on Wednesday after data showed US crude production rose for a ninth straight week, even as stockpiles continued to decline from a record.
West Texas Intermediate for June delivery dropped $1.07, or 2.1 per cent, to $49.64 a barrel at 11:12am on the New York Mercantile Exchange. Total volume traded was about 16 per cent 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 slipped $1.01, or 1.9 per cent, to $51.98 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.34 premium to WTI.
“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.”
Opec will decide at a meeting on May 25 whether to prolong its pledged cuts into the second half of the year.