Oil prices retreated Monday to their lowest point in four weeks, as growing U.S. production and other signs of global oversupply keep thwarting a widely-expected rally.
Monday's downturn from overnight gains is the latest sign oil may continue to fall instead of rising toward $60 a barrel as many predicted, brokers and analysts said. Losses Monday mark the sixth down session in a row for U.S. oil. It is now off 8.5% from the one-month high it hit April 11 and starting only its second stretch of the year below $50 a barrel.
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Light, sweet crude for June settled down 39 cents, or 0.8%, at $49.23 a barrel on the New York Mercantile Exchange. It is the lowest settlement since March 28.
What had been a calm time in the crude markets came to an abrupt end last week as data showing growing U.S. production and gasoline stockpiles caused a sharp selloff Wednesday. Money managers ran up a record bullish bet on oil after cuts from the world's big exporters led many to believe stockpiles would shrink -- and selloffs have followed this year as U.S. stockpile drains have been limited. A liquidation of some of those bets is probably feeding on itself, brokers said.
"The pressure valve was the (speculators) bailing on the market," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. "Since then we've been pretty much in a death spiral."
In addition to the losing streak, the market has now retreated from early gains in each of the last three sessions. That is likely another sign the momentum and sentiment from traders has switched from bullish to bearish, brokers and analysts said.
"We're potentially just getting started," said Oliver Sloup, director of managed futures at brokerage iiTrader in Chicago. "What (those exporters) are giving up in market share, it seems the U.S. is stepping in and trying to pick up as much as possible."
Traders are still concerned with data from Friday that showed another in a long string of increases to the fleet of working oil rigs, and a growing amount of oil shipments building up off the U.S. Gulf Coast. More data from over the weekend from data-tracking firm ClipperData and the Singapore government show rising stockpiles in Singapore, too, adding to the bearishness, analysts said.
Investors are now wondering whether current production cuts by the Organization of the Petroleum Exporting Countries and Russia will ultimately be enough to sufficiently cut into global supplies.
"In the second half of the year we will see strong production growth from the U.S., making the job of OPEC more difficult," said Giovanni Staunovo, analyst at UBS.
Mr. Staunovo said that when OPEC meets in May they will have to assess whether their cuts have reduced global stocks while also considering what impact reverting to higher output could have on oil prices.
"Last year's decision was also related to the weaker OPEC members wanting higher revenues and therefore I think it will be an extension, based on the fact that it generates higher revenues," he said.
Oil prices jumped around 20% last year after OPEC and other major producers agreed to cut output by around 1.8 million barrels a day for the first six months of 2017.
To date, the cartel has reached a tentative agreement to keep those cuts up till beyond June, but there is no consensus for how long.
"What worries the market is what if production cut doesn't work. What else can OPEC do?" said Gao Jian, an analyst at SCI International.
Gasoline futures lost 2.31 cents, or 1.4%, to $1.6214 a gallon, the eighth losing session in the past nine. Diesel futures lost 1.06 cents, or 0.7%, to $1.5427 a gallon, extending a losing streak to seven sessions. Both are at their lowest settlement since the last week of March.
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(END) Dow Jones Newswires
April 24, 2017 15:12 ET (19:12 GMT)