London - Oil dropped below $50 a barrel in London for the first time since late March on growing signs that OPEC’s production cuts are failing to clear a surplus of crude.
Brent futures lost as much as 2.2%. Crude output rose to 9.29 million barrels a day, the highest level since August 2015, according to the Energy Information Administration. US inventories fell less than all 11 forecasts by analysts surveyed by Bloomberg. OPEC is likely to extend production cuts for six months past June, according to Nigerian Oil Minister Emmanuel Ibe Kachikwu.
Oil is heading for a third weekly loss amid concern that increasing US output will offset efforts by the Organisation of Petroleum Exporting Countries and its allies to eliminate a global glut. OPEC will meet May 25 in Vienna to decide whether to extend supply cuts through the second half. Russia is said to support prolonging the curbs, according to a government official.
“The hopes of US stock re-balancing are being thrown into doubt,” said Tamas Varga, an analyst at PVM Oil Associates in London.
Brent for July settlement fell as much as $1.10 to $49.69 a barrel on the London-based ICE Futures Europe exchange, falling below $50 for the first time since March 22. It was at $49.79 at 14:22. The global benchmark crude traded at a premium of $2.61 to July WTI.
West Texas Intermediate for June delivery slid as much as $1.09 a barrel on the New York Mercantile Exchange to $46.73. Total volume traded was about 43% above the 100-day average. The contract gained 16 cents to $47.82 on Wednesday.
US crude output increased by 28 000 barrels a day last week for the longest run of gains since the week ended November 23, 2012, according to EIA data. Nationwide stockpiles fell by 930 000 barrels, compared with the median estimate for a 3 million-barrel drop in the Bloomberg survey.
Royal Dutch Shell reported first-quarter earnings of $3.75bn, compared with $1.55bn a year earlier. US shale driller Chesapeake Energy Corp. posted its first quarterly profit since 2014 and braced shareholders for a production surge in the second half of the year as new natural gas and oil wells come online.
Pemex is producing more gasoline and diesel at its six refineries across Mexico, reducing fuel imports and leaving less oil available for export. Saudi Arabia’s giant oil and gas reserves and any decisions about producing from them will remain solely in government hands after Saudi Aramco’s initial public offering, Deputy Crown Prince Mohammed bin Salman said on state television.