Oil Falls Most in Two Weeks as Phase Out of Supply Cuts Looms
Oil prices slid the most in more than two weeks after Russia signaled that phasing out historic supply curbs that eliminated a worldwide glut may be on the table.
West Texas Intermediate futures fell 1.6 percent on Thursday, extending the pullback from a three-year high. Russia and the Organization of Petroleum Exporting Countries will discuss whether it’s appropriate to scale back output cuts, Russian Energy Minister Alexander Novak said in St. Petersburg, adding that Russia and Saudi Arabia agree market conditions will dictate any decision.
Russia and allied oil producers are broaching the possibility of easing output limits at a time when American shale drillers are pumping record amounts of crude. Still, the dual threat of supply disruptions from Iran and Venezuela — which together account for about 14 percent of OPEC’s production — may arrest any steep price slide.
“The discussions over OPEC possibly raising production is definitely raising some concern,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
West Texas Intermediate for July delivery dropped $1.13 to settle at $70.71 a barrel on the New York Mercantile Exchange for the biggest one-day decline since May 8. The retracement clipped oil’s year-to-date advance to 17 percent.
Brent futures for July settlement fell $1.01 to $78.79 on the London-based ICE Futures Europe exchange, and traded $8.08 a barrel above WTI, the widest since April 2015.
The benchmarks are diverging as rising inventories in the U.S. weigh on American futures while risks to supply from Iran to Venezuela buoy Brent. A lack of pipelines in the prolific Permian Basin shale play in Texas is exacerbating the swelling U.S. surplus as American production tops 10 million barrels a day.
U.S. inventories expanded by 5.78 million barrels to about 438 million barrels last week, data from the Energy Information Administration showed. That was a surprise increase compared with the 2 million-barrel decline predicted in a Bloomberg survey.
Still, traders and analysts are expecting stockpile withdrawals in coming weeks that should support prices. Data provider Genscape Inc. was said to report that inventories fell by about 475,000 barrels between May 18 and May 22 at the key pipeline hub in Cushing, Oklahoma.
Yuan-denominated futures for September delivery were up 0.1 percent to trade at 485 yuan a barrel on the Shanghai International Energy Exchange. The contract declined 0.1 percent to 484.6 yuan on Wednesday.
The U.S. and Venezuela expelled each other’s top diplomats after President Donald Trump’s administration imposed sanctions in the wake of a disputed election in the Latin American nation.