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Crude Oil Price Forecast: Pushing Into Important Price Resistance

DAILY FX

Can OPEC push crude oil prices higher? To see our thoughts, access the DFX Q2 Oil forecast here.

Talking Points:

  • Crude Oil Technical Strategy: Bullish on a close above $50/bbl
  • OPEC expected to extend production cuts in Vienna next week
  • Oil price remains trapped in bearish falling channel, < Ichimoku cloud

The price of WTI crude Oil does not seem to be bothered by the headlines signaling political turmoil in the US, but rather is favoring the outlook that OPEC is expected to extend the production curb another 9-months. On May 25, investors will likely get confirmation of whether or not the production cuts will be extended, but we have already heard the support of the idea from Russia and Saudi Arabia. While many feel that OPEC has been left little choice, but to cut production due to the increase in production from shale discounting their efforts, traders still seem content to bid for Oil, which has kept the price pushing ever higher towards the important $50/bbl level for WTI Crude. The question that will continue to remain, even if the 9-month extension is approved and compliance among the members remains impressive is whether or not Non-OPEC production (i.e., shale) will swamp the deal’s effectiveness and keep the market oversupplied.

While the fundamental story shows that we should be working ever-closer to a balanced market with OPEC increasing how long they will pull back production, the charts seem also seem to favor upside if the price can close on a daily basis above $50/bbl. Given the current news cycle and encouraging EIA inventory data out of the US, the market appears to be supported near $48/bbl. A break above $50 along with the developing sentiment picture below helps to paint a picture that we’ll soon see a move to the top of the falling bearish channel near $52/bbl.

If the price can break above the top of the bearish channel, we expect the US production to play less of a factor in headlines as traders start to focus once again on an approach toward $60/bbl. If crude does move higher, it’s worth keeping an eye on Oil-driven currencies like USD/CAD, USD/NOK, and USD/MXN.

Of course, OPEC is working to put the market in a place where demand outstrips supply. If they can do that, they’ll need a helping hand from the demand side, which will likely be dependent on a resumption of positive economic activity in the US & China that has been absent of late.

Join Tyler in his Daily Closing Bell webinars at 3 pm ET to discuss tradeable market developments.

Crude Oil continues to stay offered below $47.11 as Ichimoku favors downside continuation

Crude Oil Price Forecast: Pushing Into Important Price ResistanceChart Created by Tyler Yell, CMT

Crude Oil Sentiment:

Crude Oil Price Forecast: Pushing Into Important Price ResistanceOil – US Crude: As of May 8, retail trader data shows 68.0% of traders are net-long with the ratio of traders long to short at 2.13 to 1. In fact, traders have remained net-long since Apr 19 when Oil – US Crude traded near 5301.8; price has moved 7.3% lower since then. The number of traders net-long is 6.6% lower than yesterday and 23.0% lower from last week, while the number of traders net-short is 3.4% higher than yesterday and 11.2% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil – US Crude price trend may soon reverse higher despite the fact traders remain net-long. (Emphasis Mine)

Shorter-Term US OIL Technical Levels: Thursday, May 18, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

Crude Oil Price Forecast: Pushing Into Important Price ResistanceWritten by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

Oil prices slump as DC turmoil weighs on ‘fragile’ sentiment

CNBC

A deepening political crisis in Washington accelerated the decline in prices. Investors became increasingly cautious following the latest reports of links between Russia and the campaign to elect Donald Trump president.

Traders said news that advisers to the president’s campaign last year had at least 18 undisclosed contacts with Russians had unsettled investors. Crude futures turned sharply lower after Reuters reported the news.

“Sentiment is fragile so it does not take much to rock the boat even further,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank. “This is a general risk-off move.”

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Brent crude was down 38 cents at $51.83 a barrel by 9:43 a.m. ET (1343 GMT). U.S. crude oil fell 35 cents to $48.72.

Both benchmarks rose on Wednesday after news of a drawdown in U.S. crude inventories and a dip in U.S. output. The U.S. Energy Information Administration said inventories fell 1.8 million barrels in the week to May 12 to 520.8 million barrels.

But the U.S. crude drawdown was smaller than expected and the oil market remained extremely well supplied, analysts said.

“Crude stocks are still higher than last year’s stock levels … There is a long way to go before we arrive at five-year average stock levels,” said Sukrit Vijayakar, director of Trifecta energy consultancy.

A surplus of U.S. supply has led to large volumes of crude being exported from the United States to northern Asia, undermining the OPEC-led efforts to tighten the market.

The Organization of the Petroleum Exporting Countries and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2016, a deal likely to be extended until the end of March 2018.

Here's why commodities king Dennis Gartman is not buying the surge in oil

Why commodities king Dennis Gartman is not buying the oil surge   

Other producers have been quick to fill any supply gaps.

Shipping data in Thomson Reuters Eikon shows that U.S. crude exports to Asia have soared from a handful of tankers a quarter throughout 2015 and 2016 to 10 tankers in the first quarter of 2017 and that figure is expected to rise.

North Sea oil shipments to Asia have also been at record highs this year, with 19 tankers delivering in the first quarter and a similar amount expected to go to Asia in the second.

OPEC ministers meet in Vienna on May 25 to decide production policy for the next six months and are expected to prolong their agreement to limit production, perhaps by up to nine months.

UBS oil analyst Giovanni Staunovo said he saw a 60 percent probability of OPEC extending output cuts. That should help tighten the oil market and push up prices as demand rises gradually this year, he said.

“Capped OPEC/Russian production with stronger seasonal demand during summer sets the stage for oil prices to reach $60 a barrel over the coming months,” he said.

— CNBC’s Tom DiChristopher contributed to this report.

This oil rebound is just another fake-out. Here’s where prices are really headed

CNBC

  • Crude oil prices have dropped sharply in recent weeks.
  • Despite rebounding the past two days, the price spike can’t last.
  • Here are three reasons why we could see prices fall significantly in the next six months.
Robert McNally, founder and president of The Rapidan Group
Russia oil
Sergei Karpukhin | Reuters

Since the crude oil bust began in late 2014, prices have rocketed through three major price rallies. Each rally was fueled by widespread hope and expectations – often stoked by announcements from Organization of the Petroleum Exporting Countries and other producers – that a market “rebalancing” was imminent due to shale output declines, surging demand, or OPEC intervention. But prices crashed anew after data emerged showing no decline in the glut.

The latest rally began last September amid discussions between some OPEC and non-OPEC producers to cut production. The rally gathered steam in December after 22 producers pledged to reduce their combined output by 1.8 million barrels per day from October levels. U.S. West Texas Intermediate soared to $57 per barrel from $45 average in September.

Yet despite heady expectations, slowly emerging oil market data once again dashed hopes that producer pledges would cause the towering oil glut to recede as soon as hoped. While Vienna Group producers report high compliance with production pledges, data on stocks, imports, and tanker shipments indicate the glut has not meaningfully diminished.

In recent weeks, oil prices have dropped more than 10 percent as dismayed bulls closed out their long futures positions. Burned for the third time since 2014, bulls may now be less willing to buy crude futures on producers’ words alone and may instead wait for more tangible evidence of large, sustained stock draws. Alarmed OPEC officials are responding by hinting at a deeper and longer supply cut extension when they meet in Vienna on May 25.

Looking ahead, a May 25 Vienna Deal extension and visible (albeit seasonal) U.S. crude stock draws should trigger a summer price bump into the $50s. Indeed crude prices rose over three percent on Wednesday on news of a large crude inventory draw. But the next big question will be whether glutted crude and product inventories will drop significantly through the rest of the year as leading oil forecasters expect. I am skeptical, for three reasons.

  • The first concerns a reasonable debate among analysts over how many of the barrels that have disappeared into the Asian data fog since 2014 were consumed or just stockpiled. I see more storage and less consumption, which translates into a bigger supply overhang.
  • Second, even if producers extend cuts, we have likely seen peak “compliance,” as members will be tempted to exceed agreed output limits to protect market share amid rising summer demand. Meanwhile, exempted Libyan output should increase by another 200,000 barrels per day toward 1.0 million barrels per day by fall. When combined with expected Nigerian increases, supply growth from exempted OPEC producers will almost entirely offset cuts from the Vienna Group’s OPEC participants by the fourth quarter.
  • Third, U.S. shale oil is roaring back. Lower 48 supply should rise over 600,000 barrels per day from June to December, with shale production exiting the year over 1 million barrels per day above December 2016 levels.

Investment in shale should rise approximately 50 percent in 2017; the rig count for oil-focused rigs has already increased by 34 percent this year (703 oil-focused rigs currently, up from 525 at the end of 2016), with half of the additions in the Permian (the locus of shale activity). Despite cost inflation, operators continue to realize efficiency gains and increase drilling and production.

If inventories remain stubbornly high, expect a disappointing OPEC meeting in December. Cohesion will crack and Saudi Arabia, likely the only producer substantially complying with limits at that point, may opt to open the spigots. If faced with cutting alone to sustain competitors’ drilling, Riyadh may instead accept another price collapse (and a possible IPO delay) to slow shale investment and instill Vienna Group discipline.

If the last six months have shown it is too soon to bet on a boom, the next six may indicate we have not yet escaped the bust. I see a rally after May 25. But by the middle of next year we expect crude to revisit the low $30s.

Commentary by Robert McNally, founder and president of The Rapidan Group, a global energy market, policy, and geopolitical consultancy and is the author of Crude Volatility: The History and the Future of Boom-Bust Oil Prices (Columbia University Press, 2017). From 2001 to 2003, Mr. McNally served as the top international and domestic energy adviser on the White House staff, holding the posts of Special Assistant to the President on the National Economic Council and, in 2003, Senior Director for International Energy on the National Security Council. Follow him on Twitter @andourposterity.

Singapore Oil Prices gave up earlier gains on Tuesday

Oil gives up earlier gains as rising US output, China concerns weigh

By Henning Gloystein | SINGAPORE

SINGAPORE Oil prices gave up earlier gains on Tuesday, as concerns over slowing demand and a relentless rise in U.S. crude output undermined the impact of hopes that OPEC-led production cuts could be extended.

Brent crude futures, the international benchmark for oil prices, were at $49.37 per barrel at 0252 GMT on Tuesday, down from a high of $49.60 earlier in the day and near their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $46.46 per barrel, down from an intra-day high of $46.66 and also little changed from their last settlement.

Traders said that oil markets were under pressure as persistent climbs in U.S. production, especially from shale oil drillers, and concerns over a slowdown in China undermine efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to prop up prices.

U.S. crude production has risen by over 10 percent since mid-2016 to 9.3 million bpd, close to the output of top producers Russia and Saudi Arabia.

“That’s making it difficult to drive the stockpiles down to a level OPEC thinks will see prices rise sustainably,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

U.S. bank Goldman Sachs said that U.S. shale drillers “fundamentally changed” the oil industry due to their ability to ramp up output much faster than conventional producers.

Bank of America Merrill Lynch said the low oil prices were also due to a slowdown in demand.

“Oil demand growth this year is underwhelming, in part explaining why crude oil prices and refining margins have sold off sharply recently,” it said.

AxiTrader’s McKenna said that there were concerns about Chinese economic growth as imports and exports slowed.

“The economy could slow more sharply than … expected,” he said.

Top exporter and de-facto OPEC leader Saudi Arabia said on Monday it would “do whatever it takes” to rebalance a market that has been dogged by oversupply for over two years, resulting in crude prices below $50 per barrel.

A cornerstone of the Saudi promise to rebalance the market would be to extend, potentially into 2018, a pledge led by OPEC and other producers including Russia to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

(Reporting by Henning Gloystein; Editing by Joseph Radford)

Crude Oil: No Pain No Gain

Seeking Alpha

 by: Nima Karamlou
Nima Karamlou

Summary

WTI Crude fell nearly 3% following negative headlines on Libya and OPEC.

Agreement between militants and Libyan government pave the way to higher Libyan output.

Our analysis suggests crude has downside to ~$45 in the short-run, but will be higher by year end.

Overview

WTI crude dropped nearly 3% in midday trade after a wave of bearish news surfaced regarding OPEC and Libya. Crude oil has been a laggard (3.30%) over the month and nearly (10%) in the last 3. Primary drivers of the declines in crude are expected shale ramps (increasing rig count), uncertainty around OPEC, and a reversal of fortunes for Libya.

Source: FactSet

In the energy markets, there will be no gain without pain.

OPEC & Libya In Focus

A Bloomberg article surfaced today citing the recent agreement between the Libyan prime minister, Fayez Al-Sarraj, and the Eastern Commander Khalifa Haftar that will presumably lead to a cease fire. Political upheaval and violence impacted Libyan oil production severely.

Source(s): TradingEconomics, FactSet

Rampant fighting began in 2011, closely followed by volatile swings in production. Libyan oil production that was eclipsing 1.8 mmb/d cratered below 400 tb/d. Production levels had trouble reaching 1 mmb/d during the fighting, but have steadily crept up in 2017. Libyan production has since reached 700 tb/d, falling within our bear case forecast that has Libyan production pegged between 680 tb/d-710 tb/d. It would appear that the Libyans are desperately looking to boost oil production that will provide a steady stream of revenue to the country, which was cut off during the war. The recent peace deal between the militants and the prime minister should allow for such production ramp.

Crude Oil Futures – Weekly Outlook: May 1 – 5

Seeking Alpha

Oil futures settled a bit higher on Friday, but still registered a weekly and monthly loss as signs of further gains in U.S. crude output and doubts over whether OPEC will extend output cuts at its May meeting pressured prices.

The U.S. West Texas Intermediate crude June contract tacked on 36 cents, or around 0.7%, to end at $49.33 a barrel by close of trade Friday. It fell to its lowest since March 28 at $48.20 on Thursday.

The U.S. benchmark lost 35 cents, or almost 0.6%, on the week. For April, it fell around 3%, the second straight monthly decline.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery ticked up 23 cents to settle at $52.05 a barrel by close of trade. The global benchmark sank to $51.01 a day earlier, a level not seen since March 27.

For the week, London-traded Brent futures recorded a loss of 38 cents, or nearly 0.5%. The benchmark ended about 2% lower for the month.

Crude has been under pressure in recent weeks amid fears that an ongoing rebound in U.S. shale production is derailing efforts by other major producers to rebalance global oil supply and demand.

U.S. drillers last week added rigs for the 15th week in a row, data from energy services company Baker Hughes showed on Friday, implying that further gains in domestic production are ahead.

The U.S. rig count rose by 9 to 697, extending an 11-month drilling recovery to the highest level since August 2015. The relentless increase in U.S. output has overshadowed pledged output cuts by major producers.

In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.

A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

Saudi Energy Minister Khalid al-Falih said on Friday that it was important to try and agree on an extension of a global oil cuts deal into the second half of the year with both OPEC and non-OPEC members.

Oil prices turn positive as US crude stockpiles fall by 3.6 million barrels, more than expected

CNBC

Getty Images
Rusted out ‘pump-jacks’ in the oil town of Luling, Texas.

Oil prices edged higher on Wednesday after government data showed U.S. crude inventories fell more than expected after an industry report had indicated a surprise build in fuel stocks.

U.S. commercial crude inventories fell by 3.6 million barrels to a total of 528.7 million barrels in the week through April 21, the Energy Information Administration said. The decline came as refineries hiked output and despite a 515,000 barrels-per-day rise in net U.S. crude imports.

U.S. inventory data issued late on Tuesday by the American Petroleum Institute (API) showed crude stockpiles rose 897,000 barrels, defying expectations of a fall of 1.7 million barrels.

U.S. West Texas Intermediate (WTI) was trading up 22 cents at $49.78 per barrel by 10:38 a.m. ET (1438 GMT), after gaining 0.7 percent in the previous session.

North Sea Brent crude, the international benchmark for oil prices, pared losses to trade down 2 cents at $52.08 per barrel. Brent is about 7 percent below its April peak.

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The line in the sand for crude: Trader

The line in the sand for crude: Trader   

Offsetting the headline crude stockpile data was a rise in fuel inventories, unusual for this time of the year.

Gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 2.7 million barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

U.S. gasoline futures were down 0.7 percent on Wednesday, paring earlier losses and turning positive year to date.

Analysts say lackluster gasoline demand could leave stockpiles of the fuel elevated even through the summer driving season, when consumption surges. That would potentially hurt demand for feedstock crude oil.

Brent and WTI also found support from Saudi Energy Minister Khalid al-Falih, who said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize oil prices.

Man who called oil price collapse now sees this

Man who called oil price collapse now sees this   

OPEC and a handful of big producers, including Russia, pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. Gulf and some other producers have indicated cuts could be extended to the end of 2017. An extension will be discussed when OPEC meets in May.

“The market remains heavy with doubts about OPEC’s ability to achieve a successful extension of the current deal with Russia adopting a lukewarm ‘wait and see’ approach,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The average value of the Brent crude forward curve has fallen by over $5 per barrel since the start of the year, when the OPEC-led supply cut started.

The slump in Brent is a result of record crude oil volumes in circulation on ships around the world. Thomson Reuters Eikon shipping data showed 50 million barrels per day were booked for shipment on tankers this month, up 10 percent since December.

— CNBC’s Tom DiChristopher contributed to this report.

Oil dives, sending U.S. crude below $50 for first time in two weeks

REUTERS

By Julia Simon | NEW YORK

NEW YORK Oil prices tumbled more than 2 percent on Friday, notching the biggest weekly decline in more than a month on mounting evidence that U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 settled at $51.96 a barrel, down $1.03, or 2 percent at the market’s close. U.S. crude futures CLc1 ended at $49.62 a barrel, down 2.2 percent, or $1.09.

Volumes were heavy, with more than 665,000 WTI futures changing hands, surpassing the daily average of 525,000 contracts.

For the week, Brent fell 7 percent, while U.S. crude lost 6.7 percent. It was the largest percentage drop for both benchmarks since the week of March 10, when rising concern about the supply glut undermined big bets on an oil rally.

Those speculative bets have been on the rise again. On Friday, the U.S. Commodities Future Trading Commission (CFTC) showed total long positions in U.S. crude rose in the week to April 18 to their highest in more than a month at 355,077 contracts. But oil has sagged in recent days, much as it did in March.

Many in the market still expect the Organization of the Petroleum Exporting Countries (OPEC) to renew its production cuts for another six months. On Friday an OPEC and non-OPEC member technical committee recommended extending cuts of almost 1.8 million barrels per day (bpd) at the upcoming May 25 meeting.

Still, shipment data shows more oil transiting world oceans than when cuts were put in place.

“The reason that we’re seeing the selloff today and really for this week has been related to the fact that we’re seeing higher waterborne imports arriving from the Middle East,” said Matt Smith, director of commodity research at Clipperdata.

“We should continue to remain well supplied at least over the next few weeks.”

In addition, Russia’s Energy Minister Alexander Novak declined to say whether Russia would adhere to an extension, saying global stocks were declining.

Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, does not expect OPEC to roll over its cuts, saying it could potentially leave the cartel vulnerable to “more stimulus of the U.S. shale oil sector.”

U.S. production, already at its highest since August 2015, looks likely to keep rising. U.S. drillers added rigs for a 14th consecutive week, Baker Hughes said on Friday.

(Additional reporting by Ron Bousso in London, Henning Gloystein in Singapore; Editing by David Gregorio and Chizu Nomiyama)

Oil near flat in strong week for crude

The Economic Times

Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683. The number of U.S. rigs has increased for 13 consecutive weeks.

Oil near flat in strong week for crudeBy Julia Simon

NEW YORK: Oil prices were little changed in modest volume on Thursday, during a week in which crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance.

At the same time, the U.S. oil rig count rose to its highest level in two years, threatening the rebalancing of markets.

Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683. The number of U.S. rigs has increased for 13 consecutive weeks.

The market has been oversupplied since mid-2014, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017.

With the increasing rig count pointing to rising supply, Tony Headrick, energy market analyst at CHS Hedging, said OPEC would be watching.

“Ultimately OPEC is viewing it as a point of discussion in terms of whether or not they look to extend cuts,” Headrick said.

OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.

OPEC data showed members of the group had cut March output beyond the level they had promised.

Benchmark Brent crude futures settled up 3 cents to $55.89 a barrel after touching a one-month high on Wednesday. U.S. West Texas Intermediate crude futures settled up 7 cents at $53.18 a barrel. Both benchmarks were set for a third consecutive weekly gain. About 431,000 U.S. crude contracts changed hands Thursday, short of the 531,000-contract average over the past 200 trading days.

The Paris-based International Energy Agency (IEA) said on Thursday that supply and demand in the global oil market were close to matching after a fall in stockpiles in developed countries in March.

The IEA said oil stocks in the Organisation for Economic Cooperation and Development industrialized countries fell by 17.2 million barrels in March, although inventories were still 300 million barrels above the five-year average.

“It can be argued confidently that the market is already very close to balance,” the agency said in its monthly report.

The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day “could prove optimistic.” (Additional reporting by David Gaffen in New York, Karolin Schaps in London and Naveen Thukral in Singapore; Editing by

Oil settles at $48.04

CNBC

Reuters

Oil settles at $48.04, down 20 cents, as US crude stockpiles swell

Oil

Lucy Nicholson | Reuters

Oil prices recouped much of their losses after sliding to almost four-month lows on Wednesday after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.

The U.S. Energy Information Administration (EIA) said U.S. inventories climbed by almost 5 million barrels to 533.1 million last week, far outpacing forecasts for an increase of 2.8 million.

“A persistent increase in U.S. oil production, together with a rise in imports from Canada, contributed towards a large build in crude oil inventories,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

“The market remains nervous about rising U.S. production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries,” Kumar added.

A close look at close oil sentiment

A close look at close oil sentiment   

Global benchmark Brent crude futures for May delivery were down 31 cents at $50.65 a barrel by 2:33 p.m. EDT (1833 GMT). The contract fell as low as $49.71.

On its first day as the front-month, U.S. West Texas Intermediate (WTI) crude futures for May settled 20 cents lower at $48.04 per barrel. The session low was $47.01.

Both benchmarks hit their lowest since Nov. 30 when OPEC countries agreed to cut output, and both remained in technically oversold territory. WTI was oversold for the third day in a row, Brent for the second.

A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has done little to reduce bulging global oil stockpiles.

OPEC, which sources say is leaning toward extending cuts, has broadly delivered on pledged reductions, but non-OPEC states have yet to cut fully in line with commitments.

Trader sees oil reversing course for a rally

Trader sees oil reversing course for a rally   

“OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling,” said Ole Hansen, head of commodity strategy at Saxo Bank.

U.S. shale oil producers have been adding rigs, boosting the country’s weekly oil production to about 9.1 million bpd for the week ended March 10 from an average 8.9 million bpd for 2016, according to U.S. data.

“OPEC’s market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience,” U.S. bank Jefferies said in a note.

But the bank said the market was undersupplied and, if OPEC extended cuts into the second half, inventories would draw down and prices recover above $60 in the fourth quarter.

However, it said U.S. crude production was expected to grow by 360,000 bpd in 2017 and 1 million bpd in 2018, and a price recovery could spur more U.S. shale activity.