Is global cooperation in the energy sector weakening?
OPEC has its work cut out to persuade the market that its output caps will stabilize oil prices -- and U.S. producers aren’t helping matters.
Crude settled below US$50 a barrel in New York on Monday for the first time in more than a year. The slide began after data provider Genscape Inc. was said to report higher inventories at the biggest American storage hub in Oklahoma and intensified as the U.S. Energy Department forecast higher output for this month and next in the country’s top shale plays.
Oil prices are on track for a third straight monthly decline despite efforts by OPEC, Russia and other major exporters to halt the slide. Crude had slunk near US$50 in recent weeks but always rebounded. Crossing the threshold was “significant," said Michael Loewen, a commodities strategist at Scotiabank in Toronto.
“We’re probably going to see a supply slowdown in the U.S.," he said by telephone. “I do think that producers will react."
A dive for U.S. equities added to the pressure on Monday as investors anticipated another interest-rate hike from the Federal Reserve that could slow the economy.
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West Texas Intermediate for January delivery fell US$1.32 to US$49.88 a barrel on the New York Mercantile Exchange and earlier fell to US$49.09, the lowest intraday price since September 2017. The February contract slipped to US$50.20.
Brent for February settlement closed down 67 cents to US$59.61 on London’s ICE Futures Europe exchange. The global benchmark traded at a premium of US$9.41 a barrel to same-month WTI.
“There’s always a question mark over to what extent the OPEC countries and Russia will or will not fulfill their promises,” said Pavel Molchanov, a Raymond James & Associates Inc. analyst. “There is naturally some skepticism.”
It typically takes about six weeks for OPEC nations to implement supply changes, and Saudi Arabia, the group’s biggest producer, faces added political pressure from U.S. President Donald Trump to keep the taps open, Molchanov said.
Other oil-market news: Gasoline futures fell 1.7 per cent to US$1.4104 a gallon in New York trading. A former lobbyist who’s helped drive the Trump administration’s policies to expand drilling on public lands is poised to take over at the U.S. Interior Department. Kuwaiti Oil Minister Bakheet Al-Rashidi and two top executives of state-owned energy companies resigned in the latest sign of disputes within OPEC’s fifth-biggest producer.