Commodities trading - oil prices under pressure

Crude fell again on Thursday as bearish momentum gathered pace following the previous day's US inventory build sparked a steep sell-off in oil prices.

WTI crashed through $50 for the first time since December and dripped below $49 as aggressive selling took hold. Brent crude broke support around $53 to move close to $52.

Oil_rigs

Oil is now trading close to levels last seen since OPEC and Russia agreed to curb output at the end of November and it could have further to go.

OPEC has rightly warned that the move to cut production could spur US shale producers and the ninth straight week of stockpile builds is a sign of rising output. Baker Hughes data shows seven weeks of gains in the rig count. Compliance with the cut to output was always a concern and looks shaky – Saudi Arabia is shipping more to the US now and it was a rise in OPEC imports to the US that drove the stockpile build.

The prospect of rising demand from a growing global economy ought to offset some of this but for now the mood is decidedly bearish as net long speculative positions are unwound.

All eyes are on OPEC again ahead of its meeting in May – can it agree further curbs or will producers desperate for cash pump more to offset the falling revenues?  Agreeing another cut could be a lot tougher if members think their efforts are merely supporting US shale producers. But if it doesn’t get member on the same page, it could unleash further output that would add to the glut and make the rebalancing in the market even further away.