Oil prices falling since mid-March
Oil prices continued to slide in trading on Monday due to uncertainty over whether members participating in the OPEC-led supply cut deal would extend the pact into the second half of the year in an effort to reduce the global crude glut.
Investors’ concerns were not calmed after the OPCE members and outside producers meeting in Kuwait over the weekend stopped short of an earlier draft statement recommending extending the agreement.
Analysts at JBC Energy said in a report about the meeting “We would see the relative lack of reaction in the price perhaps as a reflection of some disappointment that nothing more concrete was forthcoming.”
US crude was down 33 cents to $47.63/barrel, as of 1:56 p.m. EDT. Brent crude fell 17 cents to $50.63, with a session low of $50.03.
The discount of US crude to Brent has increased to about $2.90/barrel and is heading for its widest close since late 2015. Due to the discount, US producers may send more barrels overseas to take advantage of an appetite for cheaper US crude which could also help draw down record-high inventories.
Reuters reports oil prices have been falling since the middle of March following a number of reports showed stronger-than-expected growth in US inventories, sparking selling by speculators that had built record long positions in crude futures.
Futures data from last week showed speculators were still unwinding long positions due to high US production offsetting cuts from other oil producers. As of last Tuesday, long positions were at their lowest since December.
“When you look at the last two-and-a-half weeks we’ve moved into a sliding pattern vs. the sideways trend we have seen for much of the year,” Michael Train, director of global energy strategy at RBC Capital Markets told Reuters.
In contrast to the unenthusiastic mood of investors, Goldman Sachs says the crude market is rebalancing and it may not be necessary to keep output curbed.