Oil prices tumbled about 4 percent on Wednesday, ending their longest string of daily gains in more than five years, as climbing OPEC exports and a stronger dollar spurred selling.
Brent crude futures LCOc1 settled down $1.82, or 3.7 percent, at $47.79 a barrel. Prices had climbed for eight straight sessions to Monday.
US West Texas Intermediate crude CLc1 fell $1.94, or 4.12 percent, to settle at $45.13 a barrel.
“It’s a transition from being overbought for a while,” said Tyche Capital Advisors senior research analyst John Macaluso.
“I really don’t think it’s too much fundamentals driving the move today – seems more like a reversal of the trend. Eventually someone comes out of the market and everyone follows and you have to take profits.”
Prices pared losses in post-settlement trade after data from industry group the American Petroleum Institute showed US crude inventories fell 5.8 million barrels in the week to June 30 to 503.7 million barrels, exceeding forecasts for a draw of 2.3 million barrels. The API data, normally released Tuesday, was delayed by the US Fourth of July holiday.
Official data from the US Department of Energy is due on Wednesday at 11:00 a.m. EDT (1500 GMT), also delayed a day.
Oil traders hope vacationing motorists heading for the beach in July will help US gasoline demand heat up along with sweltering summer temperatures, helping drain crude inventories.
Oil exports by the Organization of the Petroleum Exporting Countries climbed for a second month in June, Thomson Reuters Oil Research data showed.
OPEC exported 25.92 million barrels per day (bpd) in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier.
The rise came despite OPEC’s vow to rein in production until March 2018 and came on the heels of Reuters’ monthly OPEC production survey which found output jumped to a 2017 high last month as Nigeria and Libya continued to pump more. Both OPEC members are exempt from the output cut deal.
Russia, which led other non-OPEC producers to join the deal, would oppose any proposal for deeper cuts at OPEC ministerial meeting later this month, Bloomberg reported, citing four Russian government officials.
“The air is getting thin for oil prices. The price increase just ran out of steam, which is not very surprising, given the news flow of rising OPEC supplies,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
Another analyst said the strong dollar provided less incentive to invest in greenback-denominated commodities such as crude oil. The dollar pared some early gains but remained near a one-week high.
The head of the International Energy Agency told Reuters that rising output from key oil producers could hamper expectations that the oil market would rebalance in the second half of the year.
Saxo Bank cut its year-end Brent crude price forecast to $53 a barrel from $58. Yet traders and analysts pointed to some technical signs that could lead to a recovery.
“The longer term moving average systems need stronger moves over $51.50 in Brent and $49 to $49.50 in WTI which is where the 100-day and 200-day moving averages are,” said Scott Shelton, broker at ICAP in Durham, North Carolina.
“Spending more time up here to get the shorter term moving averages to cross would also generate buying.” (Reuters)