Crude futures tumbled Monday, weighed down by falling gasoline prices and by concerns about increasing U.S. oil being pumped into the still-oversupplied market.
U.S. crude futures fell to a fresh one-month low, dropping 49 cents, or 0.99%, to $48.84 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 53 cents, or 1.02%, at $51.52 a barrel on London's ICE Futures Europe.
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U.S. refiners have ramped up their output and have been processing more crude oil than ever before. But the result has been big increases in gasoline stockpiles, which could become a drag on crude.
Gasoline futures fell to their lowest level since Feb. 28, dropping by 2.09 cents, or 1.35%, to $1.5272 a gallon.
"The gasoline situation is very negative here, and getting worse by the minute," said Bob Yawger, director of the futures division of Mizuho Securities USA. "There are big amounts of gasoline, and not necessarily a big demand number on the other side of the equation to wipe it out."
Production cuts by the Organization of the Petroleum Exporting Countries haven't cleared a glut of crude as quickly as many expected, and analysts said the market is caught between OPEC's curtailed production and rising U.S. output.
The OPEC-led effort to tighten the oil market has slowed the growth of global inventories but stocks are still nowhere near five-year averages, a level for which OPEC is striving.
At the same time, U.S. output continues to steadily increase, with the latest data from industry group Baker Hughes on Friday showing rigs drilling for oil in the U.S. rose again by nine last week. At 697, the volume is double from the low it fell to less than a year ago.
"You have a well-established recovery in U.S. shale sector that is most certainly diluting the impact of OPEC's efforts," said Harry Tchilinguirian, head of commodity strategy at BNP Paribas SA.
That adds to the pressure on OPEC to agree to extending its cuts when it meets May 25.
Iran on Saturday joined the growing circle of OPEC members indicating they would support an extension. For its part, Iran agreed to cap its production at 3.8 million barrels a day in the first half of 2017, which was slightly higher than its October baseline.
Nigeria and Libya were also exempt from the cuts. Libya's output is ramping up. The country's state-run National Oil Corp. said Monday that its output has reached 760,000 barrels a day -- its highest level since 2014 -- which also weighed on oil prices Monday, analysts said.
The general market expectation is for the consortium to further curtail production after June, but several questions still loom, including the length of the extension, quotas for the individual producers and the continuing support of non-OPEC members such as Russia.
"Iran wasn't really the hurdle, when you look at the other OPEC members and how they discussed the extension, what is more important is Russia," Mr. Tchilinguirian said.
In the initial agreement Russia agreed to cut output by 300,000 barrels a day.
"If an extended production agreement is reached...then the market would remain supported in the second half of the year," said Stuart Ive, a client manager at the New Zealand-based OM Financial.
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(END) Dow Jones Newswires
May 01, 2017 16:16 ET (20:16 GMT)