Oil prices slip to near 1-week low despite OPEC output cut extension
Oil prices fell on Tuesday, with U.S. crude dropping to its lowest since November, as concerns about new supplies overshadowed the latest talk by OPEC that it was looking to extend output cuts beyond June.
The decline also came ahead of the release of U.S. crude inventory data later Tuesday and on Wednesday that is expected to show a crude stock build of 2.8 million barrels for last week, according to a Reuters poll. [EIA/S]
If correct, that would be the tenth weekly crude stock build in the last 11 following a surprise dip in the prior week and could boost inventories back to a record high.
Brent futures for May delivery fell 66 cents, or 1.3 percent, to settle at $50.96 a barrel, its lowest since March 14.
U.S. West Texas Intermediate crude, meanwhile, shed 88 cents, or 1.8 percent, to settle at $47.34 per barrel on the last day for the April contract, falling to its lowest since Nov. 29, before a global effort to shore up prices.
The Organization of the Petroleum Exporting Countries and some non-member producers agreed on Nov. 30 to curb production by 1.8 million bpd from January for six months.
But that deal has unintentionally helped what could be the largest increase in mega projects’ production in history, Goldman Sachs said in a research note..
New production projects and a fresh shale boom could boost output by a million barrels per year and result in an oversupply in the next couple of years, the bank said.
“U.S. oil producers are not going to be held back. For every barrel Saudi Arabia takes off, it looks like U.S. E&Ps (exploration and production companies) are going to put on two,” said Kyle Cooper, a consultant for ION Energy in Houston.
The market has declined despite indications on Tuesday that OPEC members increasingly favour extended production cuts but want the backing of non-OPEC oil producers, such as Russia, which have yet to deliver fully on existing reductions.
