Oil Prices Fall to New 2017 Lows

Oil prices on Tuesday fell to a new low this year, as investors remain skeptical about major oil producers' efforts to buoy the market by withholding petroleum supplies.

Brent crude, the international benchmark for oil prices, fell 1.68% to $46.16 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, the benchmark for U.S. oil prices, West Texas Intermediate futures, was trading down 1.81% at $43.40 a barrel.

Oil prices have been on a downward trend for nearly a month since the Organization of the Petroleum Exporting Countries and big-producer allies decided to extend an agreement that holds back almost 2% of the global crude supply. The 14-nation cartel's aim is to draw down a glut of oil and raise prices but oil in storage has remained at stubbornly high levels. Brent is down 18.6% overall for the past 6 months.

OPEC's efforts are being undermined by its own members and rising production in other countries, such as the U.S.

Libya, an OPEC member that was exempt from the supply cut, is ramping up its oil production and has almost achieved its short-term production goal of 900,000 barrels a day, said analysts for Commerzbank.

U.S. oil drillers continue to ramp up their production. The latest data from the oil-services firm Baker Hughes showed the rig count climbed by 6 to a 26-month peak of 747.

According to Morgan Stanley, identifiable oil inventories -- both oil and products in the Organization for Economic Cooperation and Development, China and selected other non-OECD countries -- increased at a rate of around 1 million barrels a day in the first three months of 2017.

There are data that should have investors more optimistic soon.

Standard Chartered PLC analysts foresee oil-storage levels falling significantly in the second half of 2017, a view that is also supported by the top energy watchdog, the International Energy Agency.

But for now, said Emily Ashford, director of energy research at Standard Chartered, "it doesn't even matter if there is any positive data, it just seems so bearish."

"There is a disconnect between the actual data coming out and what the markets thinks," she said.

Later on Tuesday investors are looking forward to data from the American Petroleum Institute puts out estimates of crude supply and stocks.

Analysts surveyed by S&P Global Platts estimate U.S. oil inventories fell 2 million barrels last week, with gasoline supplies dropping 750,000. Stated inventories in the prior two weeks' government reports have been higher than analysts anticipated.

Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- fell 0.23% to $1.45 a gallon. ICE gas oil changed hands at $420.75 a metric ton, down $3.25 from the previous settlement.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

U.S. oil prices are suffering another day of big losses, threatening to enter a bear market and set new lows dating back to August as oversupply concerns continue to roil the market.

Money managers are, yet again, pulling out from what had been a big bet that global exporters could ease oversupply through a historic agreement to cut output, analysts and a broker said. These types of big selloffs have become common in the oil markets since March. The market is now on pace for its eighth loss of more than 2% in just the past two months.

Rising production from the U.S. and Libya, and stubbornly high stockpiles are undermining predictions that cuts from other producers would send prices higher. Money managers had placed a record high number of bets that oil prices would rise even after they went beyond $50, but that has led to a strong momentum for prices to keep falling as those traders backtrack, analysts and a broker said.

"Bearish sentiment is pervasive in oil markets as bulls have been burned on several occasions this year and this has triggered an unwind," analysts at Citigroup Inc. said in a note.

U.S. crude for July delivery recently lost $1.32, or 3%, to $42.88 a barrel on the New York Mercantile Exchange, trading at prices it hasn't settled below since Aug. 10. A settlement at $43.56 a barrel or lower would put it into a bear market, which means it has lost 20% or more since the recent high, a nearly one-year high on Feb. 23.

The July contract expires at settlement, and the more actively traded August contract recently lost $1.38, or 3.1%, to $43.05 a barrel. Brent, the global benchmark, recently lost $1.37, or 2.9%, to $45.54 a barrel on ICE Futures Europe, lows dating back to mid-November.

Many traders have been watching U.S. inventory levels, and that may be playing a role again Tuesday. With all the momentum pushing the market lower, even traders who believe output cuts are putting the market closer to a supply shortage aren't willing to place bets on that until after the U.S. government's influential weekly report on storage levels, due Wednesday morning, said Scott Shelton, broker at ICAP PLC.

"Most of the bulls are waiting on statistics, and they're not going to stand in front of this thing until then," he said.

Analysts and traders surveyed by The Wall Street Journal expect crude stockpiles to fall by 2 million barrels, on average, in the week ended June 16. The U.S. Energy Information Administration report is scheduled for release at 10:30 a.m. ET on Wednesday.

The Organization of the Petroleum Exporting Countries and big-producer allies did agree last month to extend an agreement through March that effectively holds back almost 2% of the global crude supply. But that didn't satisfy traders who think that may not be enough to end an oversupply that dates back to 2014, and prices have fallen 17% since OPEC announced the extension in late May.

The 14-nation cartel's aim is to draw down a glut of oil and raise prices, but oil in storage has remained at stubbornly high levels. OPEC's efforts are being undermined by its own members, some of whom have exemptions, and rising production in other countries, notably from shale-drillers in the U.S.

Inventories aren't on pace to fall into OPEC's target area any time in the next 18 months, Morgan Stanley analysts said in a note released Tuesday morning. Rising demand from drivers in the summer is likely to keep stockpiles falling through the end of this year, but it is enough to cut only a little more than half of a surplus currently in storage, compared with five-year-average levels, the bank said.

Its estimates show surging U.S. production and the eventual rebound of OPEC and Russian production will cause inventory levels to rise again starting in 2018. OPEC would need to extend its cuts through the end of 2018 or make deeper cuts to get inventories back down to historical averages, said the Morgan Stanley team, led by Martijn Rats.

"Recent data points are not encouraging," he said.

U.S. oil drillers continue to ramp up their production. The latest data from the oil-services firm Baker Hughes showed the rig count climbed by 6 to a 26-month peak of 747.

Identifiable oil inventories -- both oil and products in the Organization for Economic Cooperation and Development, China and selected other non-OECD countries -- increased at a rate of around 1 million barrels a day in the first three months of 2017, according to Morgan Stanley.

Later on Tuesday, investors are looking forward to data from the American Petroleum Institute, which puts out estimates of crude supply and stocks.

Gasoline futures recently lost 2.1% to $1.4199 a gallon and diesel futures lost 1.9% to $1.3846 a gallon.

Stephanie Yang contributed to this article.

Write to Timothy Puko at tim.puko@wsj.com, Neanda Salvaterra at neanda.salvaterra@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

June 20, 2017 13:08 ET (17:08 GMT)