Oil prices have fallen about two per cent, with US crude touching its lowest level in nearly two months, breaking below technical support levels as investors keep selling amid growing US production, possible global supply growth and nagging trade tensions.
Brent crude futures lost $US1.50 a barrel, or 2 per cent, to settle at $US75.29 a barrel. US crude ended $US1.06, or 1.6 per cent, lower at $US64.75 a barrel, after earlier touching $US64.57, its lowest since April 10.
‘We are breaking key levels of support now,’ said Phillip Streible, analyst at RJO Futures in Chicago. ‘Once we started taking out $US65.50 or so, it really started to accelerate. People are not really believing that the rally will continue,’ he said.
Both benchmarks were pressured by the expectation that the Organization of the Petroleum Exporting Countries (OPEC), which has led output cuts of about 1.8 million barrels per day (bpd) since January 2017, would soon boost output.
OPEC ministers from Saudi Arabia, the United Arab Emirates, Kuwait and Algeria, along with their counterpart from non-OPEC Oman, met unofficially in Kuwait on Saturday.
‘It appears that some sellers may have delayed action ahead of the weekend and re-entered the short side after a meeting between the Saudis and the other Arab producers failed to offer additional insight,’ Jim Ritterbusch, president of Ritterbusch and Associates said in a note.
OPEC meets formally on June 22. It is expected to agree to raise output to cool the market amid worries over Iranian and Venezuelan supply and after Washington raised concerns that the oil rally was going too far, OPEC sources familiar with the discussions told Reuters last month.
US crude production climbed in March to 10.47 million bpd, a monthly record, the Energy Information Administration said last week.
‘There’s been lot of talk about US production continuing to rise. And it feels like once we hit Memorial Day, we hit a seasonal peak’ for prices, which ‘ran up until the start of the summer season, and then hit a summer doldrums,’ said RJO Futures’ Streible.
Last week, the week after Memorial Day, the US crude contract lost about 3 per cent after a decline of nearly 5 per cent the previous week.
Data from market intelligence firm Genscape showed that between May 29 and June 1, crude inventories at the Cushing, Oklahoma, storage hub and delivery point for US crude futures rose 210,046 barrels, a potentially bearish signal, traders who saw the data said.
‘The trade tariffs between EU, Mexico, and Canada and the friction with China are also weighing on crude oil,’ said Bill Baruch, president of Blue Line Futures in Chicago.
Mexico will join the European Union in seeking World Trade Organization involvement over US tariffs on steel and aluminium, its economy ministry said.