Oil slipped as broader investment sentiment soured and traders weighed signs of a weakening physical market ahead of the start of the U.S. summer driving season. 

West Texas Intermediate settled below US$77 a barrel for the first time since late February. Crude prices have tracked broader financial markets amid a muddled outlook for the commodity’s fundamentals. A report Wednesday showed inventories at the key storage hub in Cushing, Oklahoma, swelling to the highest in 10 months, while U.S. gasoline demand improved marginally ahead of the Memorial Day holiday weekend.

Crude prices have retreated about 12 per cent from this year’s peak — even as global demand heads toward a new annual record — due to plentiful supplies from the Americas, a fragile economic outlook in China and uncertainty over US monetary policy. Federal Reserve minutes from a meeting earlier in May indicated a hawkish stance from officials.

The headwinds have led money managers to trim their bets on rising prices. The prompt spread for Brent, a key market measure, has shrunk closer to a bearish contango structure, which would indicate ample supply. 

As a result, the OPEC+ alliance of producers led by Saudi Arabia and Russia is widely expected to prolong current output curbs into the second half of the year when it meets on June 1. Moscow pledged on Wednesday to make up for pumping above its agreed limit, but the country has a mixed track record on compliance. 

Prices:

• WTI for July delivery fell 70 cents to settle at $76.87 a barrel in New York.
• Brent for July settlement dropped 54 cents to settle at $81.36 a barrel.