U.S. oil prices tumbled into a bear market on Tuesday as the oversupply concerns that have roiled markets over the past few weeks put further pressure on investors.
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Bets that global exporters could ease a supply glut through a historic agreement to cut output have been undermined as production has increased in the U.S., Libya and Nigeria. Global inventories of crude oil and oil products have remained high, compounding on worries that rebalancing the global oil market will be harder than previously thought.
Light, sweet crude for July delivery settled down 97 cents, or 2.2%, at $43.23 a barrel on the New York Mercantile Exchange, more than 20% below this year's high of $54.45 on Feb. 23. Brent, the global benchmark, settled down 89 cents, or 1.9%, to $46.02 a barrel.
Tuesday's close put oil in a bear market for the first time since August 2016, before the Organization of the Petroleum Exporting Countries and other major oil-producing nations agreed to limit output by about 1.8 million barrels a day at the end of last year. In May, the group renewed the deal through March 2018.
The extended drop in oil prices is another worrying sign for OPEC, analysts said, which has struggled to put a dent in global inventories and keep oil prices supported.
"We're seeing this decline amid some major OPEC production restraints," said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates. "That's the huge difference" compared with previous bear markets.
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U.S. companies have also ramped up shale production in response to higher prices this year, helping to offset impacts made by the OPEC cut, analysts said.
Traders have been watching U.S. inventory levels, which have added to the bearish sentiment in recent weeks. With momentum pushing the market lower, even traders who believe output cuts are putting the market closer to a supply shortage aren't willing to place bets on that until after the U.S. government's influential weekly report on storage levels, due Wednesday morning, said Scott Shelton, broker at ICAP PLC.
"Most of the bulls are waiting on statistics, and they're not going to stand in front of this thing until then," he said.
The U.S. Energy Information Administration report is scheduled for release at 10:30 a.m. ET on Wednesday. Analysts and traders surveyed by The Wall Street Journal expect crude stockpiles to fall by 2 million barrels, on average, in the week ended June 16.
Even amid falling crude stockpiles in the U.S., oil prices have dropped as tepid stock draws have failed to impress investors. Tuesday's move marked oil's eighth loss of more than 2% in just the past two months.
"Barring a major draw that surprises people that's well over expectations, it's probably not going to provide much in the way of support," said John Saucer, vice president of research and analysis at Mobius Risk Group. "The market's definitely been very receptive to bearish news."
Later on Tuesday, investors are looking forward to data from the American Petroleum Institute, which puts out estimates of crude supply and stocks.
Gasoline futures fell 1.8% to $1.4240 a gallon and diesel futures lost 1.1% to $1.3949 a gallon.
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(END) Dow Jones Newswires
June 20, 2017 15:55 ET (19:55 GMT)