Oil prices resumed losses Friday to trade at four-week lows, after rising U.S. production and President Trump's withdrawal from the Paris Climate Accord helped reignite a recent selloff.
Light, sweet crude for July delivery recently lost $1.16, or 2.4%, to $47.20 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.28, or 2.5%, to $49.35 a barrel on ICE Futures Europe.
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Losses would be the fifth in seven sessions for U.S. oil, which has now canceled out more than half of a rally that had briefly taken prices back to $50 a barrel in May. That target has become difficult to hold in recent months with several selloffs causing sharp retreats since early March.
Lots of the fear in the market comes from rising production in the U.S. and the chance it may quickly replace massive cutbacks promised by the Organization of the Petroleum Exporting Countries and other major exporters to ease a longstanding glut. Beyond those questions, the selloffs have become self-reinforcing, with momentum-based traders often taking control of the market and selling, brokers have said.
Brent prices fell and U.S. oil made only marginal gains on Thursday despite a government report showing big declines in some U.S. stockpiles and signs of strong demand, "the strongest single week's data for several years," according to Standard Chartered PLC. Gains were muted throughout that session and then evaporated in the last half-hour of trading, a pattern that itself is likely convincing more traders to sell Friday, brokers said.
"Yesterday's close was about as bearish as it gets," Chicago brokerage iiTrader said in a note.
U.S. prices are now down 8.1% since OPEC and other exporters agreed to extend ongoing production cuts by nine months on May 25. Investors have returned their focus to rising production, with U.S. average daily output last week hitting its highest level since August 2015.
"Oil prices dropped below 50 this morning as [the] continued global oil glut seems to outweigh bullish U.S. oil inventory reports and Trump exiting the 2015 Paris climate agreement," said Michael Poulsen, oil risk manager at Global Risk Management.
Brent crude has fallen more than 5% this week, after investors were disappointed OPEC didn't do more to address the global supply glut.
"Supply-side concern is still very strong," said Vivek Dhar, commodities strategist at Commonwealth Bank of Australia.
As OPEC and other major producers cap their production, analysts see U.S. crude output continuing to trend higher as long as global prices stay above $40, a threshold at which many large U.S. oil companies can produce at a profit.
This could be compounded by President Trump's decision to exit from the global pact to address climate change.
"With the U.S. putting the environmental agenda on the back burner, its fossil fuel industry looks set to receive carte blanche on drilling rights which will further spur the revival in U.S. oil supply," said Stephen Brennock from brokerage PVM.
Gasoline futures recently lost 2.3% to $1.565 a gallon and diesel futures lost 2.1% to $1.4703 a gallon.
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(END) Dow Jones Newswires
June 02, 2017 16:36 ET (20:36 GMT)