Futures dropped 1.8 percent in New York, erasing an early advance, as the S&P 500 Index headed for its fourth straight decline as investors assessed the prospects for Donald Trump’s pro-growth policies gaining congressional approval. U.S. stockpiles probably rose to a record last week, according to a Bloomberg survey before a government report Wednesday. Prices increased earlier amid speculation OPEC may extend its supply-cut deal past June.
“There’s a generalized selloff here,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone. “Oil has been tracking the S&P 500 pretty closely, and of course has its own issues. General expectations about what Donald Trump would do for growth helped both oil and stocks. Those are fading fast.”
Oil dipped below $50 a barrel this month for the first time in 2017 as record U.S. stockpiles and rising output weighed on the reductions by OPEC and its allies. While the Organization of Petroleum Exporting Countries won’t decide until May whether to prolong the cuts, ministers and officials from outside the group, including Russia’s Alexander Novak, will meet this weekend in Kuwait to discuss the deal’s progress.
West Texas Intermediate for April delivery, which expired Tuesday, dropped 88 cents to $47.34 a barrel on the New York Mercantile Exchange. It was the lowest close since Nov. 29. The more actively traded May contract slipped 67 cents to $48.24.
Brent for May settlement declined 66 cents to $50.96 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude settled at a $2.72 premium to May WTI.
Trump met with House Republicans Tuesday morning in Washington to rally support for the repeal of Obamacare as investors look for signs that his plans to cut corporate taxes and boost spending will move forward. House Republicans warned that a failure to pass a health-care bill could imperil tax and spending reform.
“The catalyst is concern over demand due to potential difficulties with President Trump getting his pro-growth agenda through,” Bart Melek, the head of global commodity strategy at TD Securities in Toronto, said by phone.
U.S. crude inventories eased off the highest level in more than three decades in the week ended March 10, dipping to 528.2 million barrels, according to the Energy Information Administration. Analysts surveyed by Bloomberg forecast a 3 million-barrel increase for the week ended March 17, which would take supplies to a new high. The industry-funded American Petroleum Institute is scheduled to release its own weekly figures after the settlement Tuesday.
WTI is nearing key technical resistance levels, according to data compiled by Bloomberg. The 50 percent Fibonacci retracement from the August low of $39.19 to the January high of $55.24 stands at $47.22. The 38 percent retracement of rally is $45.32. Investors typically sell contracts when prices dropped below technical support.
“This is a do-or-die time for the oil bulls,” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by telephone. “Prices have to hold in the $47.22-to-$45.32 range or there will be a flush back to $40, and even lower.”
- Saudi Arabia reduced crude exports in January as it led OPEC members in cutting output to rebalance the market. Shipments fell 3.8 percent to 7.7 million barrels a day, according to data published Monday on the Joint Organisations Data Initiative website.
- Saudi Arabian Oil Co. is seeking to raise about $2 billion in its debut bond sale, the first step of a plan by the energy giant to tap markets for $10 billion, according to people familiar with the matter.
- Libya’s major oil ports of Es Sider and Ras Lanuf are resuming operations and preparing exports after a two-week halt in shipments due to clashes.