Futures have collapsed 11 percent this week, slumping to the lowest since Nov. 15 — two weeks before the Organization of Petroleum Exporting Countries agreed to production curbs to boost prices and ease a global glut. The decline is being driven by expanding U.S. output that’s countering the group’s curbs. Energy companies in Asia slumped on Friday, after their American counterparts were hammered in the previous session.
While news of OPEC’s cuts drove prices in early January to the highest since July 2015, that increase encouraged U.S. drillers to pump more. The result has been 11 straight weeks of expansion in American production in the longest run of gains since 2012. Prices are still more than 50 percent below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share.
“There’s disappointment that the production cuts we’ve seen from OPEC and others has not had any impact at this stage on global inventory levels,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market seems to be much further away from a balanced situation than some had previously forecast. There is a possibility that oil could be headed to the low $40s range from here.”
West Texas Intermediate for June delivery dropped as much as 3.9 percent to $43.75 a barrel on the New York Mercantile Exchange. Total volume traded was more than double the 100-day average. The contract lost $2.30, or 4.8 percent, to $45.52 on Thursday. Prices closed at $45.23 on Nov. 29, the day before OPEC agreed to supply cuts.
Brent for July settlement slumped 2.4 percent to $47.21 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.41 to $48.38 on Thursday. The global benchmark traded at a premium of $2.51 to July WTI.
Energy companies led losses among equities in Asia, with the MSCI AC Asia Pacific Energy sub-index dropping 1.3 percent. PetroChina Co. lost 3 percent, while Australia’s Santos Ltd. slipped 3.6 percent. The S&P Oil & Gas Exploration and Production Index had slid as much as 4.9 percent Thursday to the lowest since August.
U.S. crude production rose to 9.29 million barrels last week, the highest level since August 2015, according to the Energy Information Administration. While OPEC is likely to prolong curbs for a further six months, American shale supply remains a concern, according to Nigeria’s oil minister.
OPEC will meet May 25 in Vienna to decide whether to extend supply cuts through the second half.
- From Exxon Mobil Corp. to Total SA, the world’s largest listed oil companies have sent a message to skeptical investors and rivals at OPEC: we can get by in a world of $50 a barrel crude.
- Russia thinks it will be necessary to extend its agreement to cut oil output in conjunction with OPEC beyond June, Energy Minister Alexander Novak said in an emailed statement Thursday.