Oil headed for its biggest weekly drop in four weeks as U.S. supply data signaled that OPEC’s efforts to re-balance oversupplied markets need more time.
Futures slumped as much as 3.4 percent in New York and Brent crude in London slid below $50 a barrel. While U.S. government data released on Thursday showed that crude inventories fell twice as much as forecast last week, rising exports and production suggest the glut is lingering. Russia’s most powerful oil boss said output curbs by the country and OPEC probably won’t succeed over the long term.
Oil slid last week after the agreement by the Organization of Petroleum Exporting Countries and its allies to prolong output curbs for nine months disappointed some investors hoping for more. While U.S. stockpiles have edged lower, rising American production and drilling is fanning concerns that OPEC’s efforts to trim a global glut will be hampered.
“The market is testing OPEC for firmer action,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland. “U.S. crude oil exports were a strong contributor to the crude oil stock draw. As long as U.S. crude stocks draw more because of high exports than low imports from OPEC, it will be difficult to have a strong price recovery.”
West Texas Intermediate for July delivery lost as much as $1.62 to $46.74 a barrel on the New York Mercantile Exchange, and was at $47.47 at 1:08 p.m. in London. Total volume traded was about double the 100-day average. Prices are down 4.8 percent this week, the most since the week ended May 5. The contract gained 4 cents to $48.36 on Thursday.
Brent for August settlement dropped as much as $1.68, or 3.3 percent, to $48.95 a barrel on the London-based ICE Futures Europe exchange. Front-month prices are down 4.9 percent this week. The global benchmark crude traded at a premium of $2.02 to August WTI.
Inventories fell by 6.43 million barrels last week, according to Energy Information Administration data, more than double the median estimate in a Bloomberg survey. U.S. production rose for the 14th time in 15 weeks, by 22,000 barrels a day to 9.34 million.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, fell for a second week to 64.8 million barrels.
U.S. shale production can fill the shortfall from production cuts by OPEC and Russia by the middle of next year, Rosneft Oil Co. PJSC Chief Executive Officer Igor Sechin said at the St. Petersburg International Economic Forum. Sechin, a close ally of President Vladimir Putin, expects shale oil output to increase by about 1.5 million barrels a day in 2018, close to the entire cut targeted by OPEC and its allies.