Crude oil fell, snapping the longest winning streak this year, as Russia was said to oppose any proposal to deepen OPEC-led production cuts.
Futures dropped 1.3 percent in New York after eight straight sessions of gains. Russia wants to continue with the current deal and any further supply curbs would send the wrong message to the market, according to government officials. The U.S. dollar strengthened, reducing the appeal of commodities denominated in the currency.
While prices have surged during the past week, oil remains in a bear market amid concerns that rising global supply will offset output cuts from the Organization of Petroleum Exporting Countries and its partners. Libya and Nigeria, exempt from the OPEC-led curbs, accounted for half of the group’s production boost last month, according to data compiled by Bloomberg.
“Any opposition to deeper output cuts supports the doubters of the effectiveness of the supply deal, fueling bearish oil-market sentiment,” said Norbert Ruecker, head of commodities research at Julius Baer Group Ltd. in Zurich.
West Texas Intermediate for August delivery was down 59 cents at $46.48 a barrel on the New York Mercantile Exchange at 8:05 a.m. local time. Tuesday’s transactions will be booked Wednesday for settlement purposes because of the U.S. Independence Day holiday. Prices gained almost 11 percent in the eight days through Monday.
Brent for September settlement was at $49.12 a barrel on the London-based ICE Futures Europe exchange, down 49 cents. The contract fell 0.1 percent to $49.61 on Tuesday, the first decline in nine sessions. Prices dropped 9.3 percent in the previous quarter.
Deepening cuts would suggest that OPEC, Russia and their allies are nervous that the pact to reduce output by a combined 1.8 million barrels a day through March 2018 isn’t doing enough to support prices, one of the Russian officials said.
“Any proposal to cut deeper would result in an overshooting in prices, which would rapidly prove self-defeating due to the unprecedented velocity of U.S. shale oil,” said Jan Edelmann, an analyst at HSH Nordbank AG in Hamburg. “The rebalancing process in global oil markets is still making progress.”
U.S. crude inventories probably shrank by 2.5 million barrels last week, according to the median of four estimates in a Bloomberg survey before the government releases its report. Qatar Petroleum is taking “legal actions” after Abu Dhabi National Oil Co. declared force majeure to halt condensate shipments from Qatar, according to QP’s chief executive officer. Oil inventories will decline by about 1 million barrels a day in the second half, Citigroup Inc.’s Head of Commodities Research Ed Morse said in a report.