Oil at Two-Week Low as Equities Dip, Concerns Linger Over Shale

(Bloomberg) -- Oil closed lower amid a selloff in equity markets and growing concern about increasing U.S. crude production.

Futures dipped 1.1 percent to the lowest level in two weeks in New York on Thursday. Stock markets slumped after President Donald Trump said he'll slap tariffs on steel and aluminum imports to protect national security. The tariffs may elevate the cost of new oil pipelines at a time of swelling domestic crude stockpiles and accelerating output by drillers.

“You're starting to see worries creep in about the effect of the possibility we're going to impose more tariffs and then what that could do to trade and the global economy,” said Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut. Rising U.S. crude production has “reawakened the worries that if we see the growth that we're supposed to, we'll see 11 million barrels a day by the end of the year.”

The benchmark U.S. crude, West Texas Intermediate, has retreated since rising close to $67 a barrel in late January amid growing unease about surging American production. Analysts and traders are bearish on WTI crude futures, according to a Bloomberg survey. Rising shale output is working against the Organization of Petroleum Exporting Countries' efforts to trim a global glut.

Goldman Sachs Group Inc. said the latest sell-off has been largely driven by trend-following commodity trading houses that base decisions on technical chart signals rather than the fundamentals of supply and demand.

West Texas Intermediate for April delivery slipped 65 cents to settle at $60.99 a barrel on the New York Mercantile Exchange. Total volume traded was about 18 percent above the 100-day average.

Brent for May settlement fell 90 cents to end the session at $63.83 on the London-based ICE Futures Europe Exchange. Front-month futures traded at a $3.03 premium to May WTI.

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Oil recovered some of its losses during the session as the dollar weakened. The Bloomberg Dollar Spot Index decreased as much as 0.1 percent after rising as much as 0.3 percent.

Crude inventories in the U.S. climbed for four out of five weeks, according to data from the Energy Information Administration on Wednesday. Gasoline supplies also expanded and crude production continued on its path above 10 million barrels a day, rising for six out of seven weeks.

Oil prices have been affected by “knock-on effects from other markets,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. U.S. data released Wednesday showing crude stockpiles at their highest level in about two months “was a bit of a disappointment.”

Other oil-market news:

• Gasoline futures fell 1.5 percent to settle at $1.8964 a gallon.
• Libya is keeping oil output steady as higher production from two of its biggest oil fields offsets the impact of a shutdown at a deposit operated by Italy's Eni SpA.
• North Sea Buzzard oil-field production is still restricted below 100,000 barrels a day, according to people with knowledge of the matter.
• Crude production from OPEC countries fell to a 10-month low in February, mainly due to maintenance at a field in the United Arab Emirates and continued output declines in Venezuela.

--With assistance from 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, Mike Jeffers

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