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Oil Sinks to Five-Week Low as Investors Eye Charts for Direction

Oil held losses below $62 a barrel after U.S. crude production surged to a record.

Oil Sinks to Five-Week Low as Investors Eye Charts for Direction
Extracted crude oil splashes on a worker’s hand as it’s being pours from a pipe (Photographer: Dimas Ardian/Bloomberg)

(Bloomberg) -- Oil spiraled to the lowest in five weeks as surging U.S. crude supply coupled with technical indicators signaling the potential for further price declines.

Futures fell for a fifth day in New York, posting the longest streak of losses since April 2017. The U.S. benchmark flirted with its 50-day moving average, a key technical level, while other indicators of market momentum showed the decline may not be over. The negative chart formations follow reports this week that U.S. oil production is surging even faster than previously forecast.

“The market narrative is clearly uncomfortable with the lift we are seeing in U.S. production,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone. “There is no doubt that production is recovering and that’s a negative.”

Oil Sinks to Five-Week Low as Investors Eye Charts for Direction

Analysts and traders are bearish on WTI crude futures, according to a survey by Bloomberg. U.S. crude production jumped to an all-time weekly high of 10.25 million barrels a day last week, according to Energy Information Administration data released Wednesday.

That followed a government forecast that American daily output will breach 11 million in November, a year earlier than previously expected. The weekly U.S. output figure is now higher than the 10 million barrels Saudi Arabia produced on a daily basis last month.

“That enormously steep rebound in Lower 48 production is what’s weighing on the market,” Michael Loewen, a commodities strategist at Scotiabank in Toronto, said by telephone. “The market is not entirely sure how to digest this information.”

West Texas Intermediate for March delivery fell 64 cents to settle at $61.15 a barrel on the New York Mercantile Exchange. Total volume traded was about 52 percent above the 100-day average.

Brent for April settlement declined 70 cents to end the session at $64.81 on the London-based ICE Futures Europe exchange, the lowest level since December. The global benchmark traded at a $3.87 premium to WTI for the same month.

U.S. oil output increased for a fourth week, up by 332,000 barrels a day last week, the EIA data showed. Crude in the nation’s storage tanks and terminals increased by 1.9 million barrels, while gasoline and distillate stockpiles also expanded, the data showed.

Other oil-market news:

  • Gasoline futures edged lower for a sixth session to settle at $1.765 a gallon, the lowest since early January.
  • Mexico is working on a pilot auction for shale fields later this year, Energy Minister Pedro Joaquin Coldwell said at an event Thursday in Mexico City.
  • The North Sea’s Forties Pipeline System -- one of the world’s most important crude oil conduits -- resumed operations overnight after a short halt, coming on the heels of a more significant stoppage in December.
  • The U.S. is poised to sell half of its emergency oil reserves to help pay its bills, something critics said defies the reason the stockpile was created decades ago as a hedge against supply disruptions.

--With assistance from Tsuyoshi Inajima Sharon Cho and Alex Longley

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll, Debarati Roy

©2018 Bloomberg L.P.