(Bloomberg) -- Oil slid below $50 a barrel for the first time in two weeks as a flood of U.S. crude reignited concerns over a global glut.
Futures fell 0.9 percent in New York after a government report showed record U.S. exports at a time when autumn refinery maintenance typically lowers demand. The decline is also likely being spurred by producers rushing to lock in revenue near $50 a barrel with hedging contracts.
“There was a need for light, sweet crude. Guess what? U.S. exports are meeting that need and on top of that, crude demand is going down seasonally,” Michael Wittner, the head of commodities research at Societe Generale SA in New York, said by telephone. The market will see “some typical autumn weakness in the coming few weeks.”
While a rally in September helped propel oil into a bull market, prices have slipped back after recent data showed OPEC output increased last month. Russian President Vladimir Putin said in Moscow that a possible extension of the deal with OPEC to reduce production, due to expire in March, “should be at least until the end of 2018.”
The Organization of Petroleum Exporting Countries' plan to monitor oil exports is a work in progress, Secretary-General Mohammad Barkindo said in a Bloomberg Television interview.
West Texas Intermediate for November delivery dropped 44 cents to settle at $49.98 a barrel on the New York Mercantile Exchange. Total volume traded was about 13 percent below the 100-day average.
Brent for December settlement declined 20 cents to end the session at $55.80 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.48 to December WTI.
“Producers are using any opportunity to hedge going forward. As it relates to 2018, they're under-hedged relative to where they would prefer to be,” Brian Kessens, who helps manage $16 billion in energy assets at Tortoise Capital Advisors LLC, said by telephone.
U.S. crude stockpiles fell 6.02 million barrels to about 465 million barrels last week, the biggest drop since since mid-August, Energy Information Administration data showed Wednesday. Crude exports jumped to 1.98 million barrels a day and production rose for a fourth week.
Gasoline inventories increased by the most since early August, while distillate supplies slid to the lowest level since June 2015. Meanwhile, the refinery utilization rate dropped in the midst of seasonal maintenance at plants.
Oil-market news:
- A tropical depression that could grow into a hurricane is forecast to strike the U.S. Gulf Coast late Sunday, potentially shutting down offshore oil and natural gas rigs.
- Saudi Arabia, the world's largest crude exporter, raised pricing for November sales of its light oil grades to Asia for a third consecutive month as the biggest OPEC member cuts shipments to clear a global glut.
- Libya is gradually resuming output at its Sharara oil field, according to two people with knowledge of the matter.
--With assistance from Ben Sharples Grant Smith and Annmarie Hordern
To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.
To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Carlos Caminada, Margot Habiby
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