Oil prices suffer their largest drop in a month on Wednesday, snapping their longest run of gains since 2010 after news that Russia ruled out any proposals to deepen the global production cuts and reports of higher monthly exports from OPEC.
August West Texas Intermediate oil lost $1.94, or 4.1%, to settle at $45.13 a barrel on the New York Mercantile Exchange, posting its first loss in nine sessions. That was the largest dollar and percentage loss since June 7. The contract only traded electronically and didn’t settle on Tuesday due to the Independence Day holiday in the U.S.
On Monday, WTI ended higher for an eighth straight trading day, scoring its longest streak of wins since January 2010, when the market rose for 10 straight sessions, according to data from WSJ Market Data Group. Over the period, it gained just over $4.50 a barrel, or roughly close to 11%.
September Brent oil slumped $1.82, or 3.7%, to $47.79 a barrel Wednesday on ICE Futures Europe.
Futures prices had traded in tight ranges earlier in Wednesday’s session, but were sent sharply lower after Bloomberg reported that Russia opposes any further restrictions on oil supply other than the ones already agreed. The Organization of the Petroleum Exporting Countries and a group of non-cartel members—including Russia—in May extended a deal to cut production into the first quarter of 2018.
“Following a strong rally in just eight days, the market is taking stock with news apart from those stemming from the U.S. having been mostly price-negative during the past week,” said Ole Hansen, head of commodity strategy at Saxo Bank, in emailed comments. That news includes “rising OPEC production due to Libya and Nigeria combined with Russia shooting down any hopes of further cuts.”
“$50 on Brent proved one bridge too far to cross at this stage,” said Hansen.
After oil prices in June dropped to pre-OPEC-deal levels, speculation rose that the major oil producers could extend the accord even further or deepen the cuts. But according to the Bloomberg report, citing Russian government officials, Russia thinks any further supply curbs would send the wrong message to the market and suggest the current pact isn’t doing enough.
Meanwhile, Reuters reported Wednesday that OPEC’s oil exports climbed by 450,000 barrels a day to 25.92 million barrels a day in June, from a month earlier.
Six months into the OPEC-led cuts, which began at the start of the year, the oil market showed early signs of rebalancing in the second quarter and is expected to improve even further in the second half of the year. Fatih Birol, executive director of the International Energy Agency, however, warned on Tuesday that output increases among key OPEC producers such as Libya and Nigeria—that are exempt from the pact— could jeopardize the efforts to make a dent in the global oversupply, according to Reuters.
Meanwhile, traders are looking ahead to the weekly U.S. petroleum supply and production data.
The Energy Information Administration will release its figures on Thursday, a day later than usual because of Tuesday’s holiday. The American Petroleum Institute’s report is due out late Wednesday.
Analysts polled by S&P Global Platts expected the EIA to report a decline of 1.6 million barrels in crude stockpiles for the week ended June 30. It also forecast a fall of 1 million barrels for gasoline inventories and a climb of 500,000 barrels for distillates.
August gasoline slid 3.2 cents, or 2.1%, to $1.502 a gallon, while August heating oil lost 3.4 cents, or 2.3%, to $1.479 a gallon.
August natural gas shed 11.1 cents, or 3.8%, to $2.84 per million British thermal units.
“The recent [oil] rally was looking over-extended and a sell-off was almost inevitable given that nothing had changed fundamentally,” said Fawad Razaqzada, technical analyst at Forex. “I now think that the selling may have gone too far for today’s session, so we may see oil prices stabilize a little ahead of the [EIA] crude inventories data.”