Oil futures fell Tuesday, amid persistent doubts about whether OPEC's decision to extend production cuts last week will be enough to alleviate the global supply glut.
U.S. crude futures settled down 14 cents, or 0.28%, at $49.66 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 45 cents, or 0.86%, to $51.84 a barrel on ICE Futures Europe.
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The Organization of the Petroleum Exporting Countries and other major producers, including Russia, announced Thursday that they would extend their production-cut deal through March 2018. But some traders and investors had been hoping that the group would pledge to make even deeper cuts, and crude futures slumped after the nine-month extension was announced.
"The market was just hoping for another surprise," said Emily Ashford, director of energy research at Standard Chartered, "and was just disappointed that they didn't go any further."
Prices have since recovered some ground, but market participants are still weighing whether OPEC has gone far enough.
Analysts at Goldman Sachs lowered their forecast for oil prices this year, calling for U.S. crude to average $52.92 a barrel, down from their previous estimate of $54.80. The analysts said longer-term futures prices need to fall further to slow down resurgent U.S. shale producers.
"In the face of rising supply potential from shale, new projects, and OPEC, 2018-19 oil futures need to stay at/below $50/bbl to discourage further shale ramp and encourage OPEC to keep a range-bound market share, " the analysts wrote.
Oil-field services company Baker Hughes Inc. said Friday that two more oil rigs were put to work last week. While the rapid pace of additions to the rig count has slowed, the additions marked the 19th consecutive week of increased drilling activity in the U.S., threatening OPEC's goal of reducing inventories.
"OPEC jawboning is only worth so much considering every week you see the rig count go up," said Ric Navy, senior vice president for energy futures at RJ O'Brien & Associates LLC.
But some said they expect prices could be poised to move higher after oil pared losses in earlier trading. Mark Waggoner, president of Excel Futures, said he thinks the 5% drop in prices after OPEC's announcement last week was probably an overreaction. When prices started to rise late Tuesday, he started buying.
"When it was down this morning, I was very leery of it, but toward the end of the day I pulled the trigger," he said. "They're going to be cutting back for nine months, we're in a high demand season -- the price should go higher."
Due to the Memorial Day holiday in the U.S. on Monday, investors will watch for an estimate on Wednesday from the American Petroleum Institute, an industry group that forecasts production and stock levels.
On Thursday, the U.S. will release official data on crude stocks, which have declined for seven straight weeks. Global supplies remain above a five-year average, however, and any decline will likely be instrumental in helping OPEC members decide their next steps.
"Markets will certainly be very focused on data releases," OM Financial's Stuart Ive said.
Gasoline futures fell 0.37 cent, or 0.23%, to $1.6389 a gallon. Diesel futures fell 1.39 cents, or 0.89%, to $1.5494 a gallon.
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(END) Dow Jones Newswires
May 30, 2017 15:44 ET (19:44 GMT)