Crude closed lower for the first time in four sessions as equities declined around the world against the backdrop of surging oil-production growth from U.S. shale drillers.
Futures fell 0.4 percent in New York on Monday. Investors dumped stocks as risky holdings fell out of favor across the globe. The anxiety rippled through a crude market already unsettled by an increase in drilling activity by American explorers as well as inventories in U.S. tanks and terminals that have expanded in six of the past seven weeks.
“We should continue to see” rising U.S. production and stored supplies, said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors LLC. “If we see a further equity selloff,” crude’s losses may deepen.
Oil in New York has stalled out this month after registering its worst February drop in half a decade. The uplift in U.S. crude production has tempered the Organization of Petroleum Exporting Countries’ efforts to shrink a global glut. On Sunday, Russian Energy Minister Alexander Novak said his country remains committed to the OPEC-led pact to curb supplies, a campaign that may need to be extended into 2019.
West Texas Intermediate for April delivery, which expires on Tuesday, dropped 28 cents to settle at $62.06 a barrel on the New York Mercantile Exchange. Total volume traded was about 30 percent below the 100-day average.
Front-month futures traded at a 7-cent discount to the second-month WTI contract after earlier widening to as much as 10 cents. When upfront supplies sell for less than later-dated barrels — a market condition known as contango — it’s typically a bearish signal because it makes it more profitable to stow crude in storage.
Brent for May settlement fell 16 cents to end the session at $66.05 on the London-based ICE Futures Europe exchange. The global benchmark held a $3.92 premium to WTI for the same month.
OPEC Secretary-General Mohammad Barkindo said the cartel and allied oil producers are focused on a full implementation of supply curbs intended to clear excess supplies. The special group appointed to monitor implementation of the curbs estimated an overall compliance rate of 138 percent for February, according to people with knowledge of the matter.
“We started to see the light at the end of the tunnel, but there’s still some work to do,” Barkindo said in Baku. “Inventories are still higher than the five-year average.”
Focus on Cushing
Stockpiles at the key pipeline hub in Cushing, Oklahoma, probably rose last week for a second straight week, according to a forecast compiled by Bloomberg. After falling by half since late November, inventories held at Cushing may be poised for restocking as traders take advantage of the contango.
When the U.S. government releases its regular weekly storage tally on Wednesday, “the domestic production and Cushing numbers should be bearish,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York.
Other oil-market news:
Gasoline futures dropped 1.1 percent to settle at $1.9249 a gallon on Monday. Iran’s oil exports averaged 2.6 million barrels a day in the Iranian year 2017-2018, Iran Oil Ministry’s news service Shana reports. Saudi Arabia’s exports of diesel and gasoline soared to a record in January, underscoring a big advantage the world’s largest oil exporter has over other producers who are more dependent on shipments of lower-value crude.