Here's Why Oil Prices Dipped Below $50 Today
Following the release of new reports indicating that U.S. crudes supplies were climbing unexpectedly fast, oil prices dipped to their lowest levels of the year on Thursday morning. Just days after the oil market was reassured that members of OPEC were committed to their promises to cut output, oil traders are now facing new confusion over the long-term outlook of the commodity.
By 11:15 AM EST, the April contract for U.S. crude was down $1.18, or 2.35%, to $49.13 a barrel. May Brent crude was also down, sliding about $1.08, or 2.03%, to $52.03.
The United States Oil Fund USO, an ETF that tracks WTI crude prices, was also down about 2.35% on Thursday.
The selloff comes after the U.S. Energy Information Administration reported an 8.2 million barrel increase in domestic supplies for last week, marking the ninth-straight weekly increase and bringing total inventory to 528.4 million barrels.
On Tuesday, the American Petroleum Institute reported a gain of 11.6 million barrels, which came in well above the forecasted 2 million barrel increase. U.S. production climbed to nearly 9.1 million barrels a day, its highest level in more than a year.
As domestic inventory continues to climb, the pressure is on OPEC member nations to avoid a global supply glut. Earlier this week, OPEC Secretary General Mohammed Barkindo dined with executives from several U.S. shale producers in a rare showing of casual cooperation. Barkindo would later state that commitment among OPEC members who agreed to output cuts “remains high.”
While OPEC seems willing to comply with its previously-agreed cuts, continued increases in U.S. supply may make it less-likely for the cartel to continue cutting output when it meets again in May.
OPEC member nations, including global price influencers like Saudi Arabia, and non-OPEC producers like Russia will be faced with the decision to forfeit market share to U.S. producers or—perhaps—initiate yet another international pricing war.
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US-OIL FUND LP (USO): ETF Research Reports
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