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US Crude Sinks Below $50 on OPEC Doubts

April 25, 2017 at 16:45 by Andrew Moran

US crude is trading under $50 on growing concerns of rising supplies. Investors are skeptical that Organization of the Petroleum Exporting Countries (OPEC) nations will be able to shrink global crude supplies. Traders are also worried about a rebound in US oil production.

June West Texas Intermediate (WTI) crude futures dipped $0.21, or 0.43%, to $49.02 per barrel at 16:31 GMT on Tuesday on the New York Mercantile Exchange. US crude, which pared some of its earlier losses, is trading at its lowest level in April. US crude is staying in line with its 200-day moving average of $48.91.

Brent, the international benchmark for oil prices, is trading relatively flat. June Brent crude prices fell $0.11, or 0.21%, to $51.49 a barrel on London’s ICE Futures Exchange. Brent is also trading at a four-week low.

Oil prices are being impacted by investor concerns that OPEC countries will be unable to lower international crude supplies after several years of oversupply. OPEC and Russia have been successful in lowering output by 1.8 million barrels per day (bpd) in the first half of 2017. Despite this arrangement, oil supplies are still at record highs.

Investors are also keeping a close eye on the US, where oil companies have been taking advantage of higher crude prices. Although the closely watched rig count stands at a two-year high with 683, it is estimated that just 70% of the available oil rigs are in full operation.

Reports suggest that oil-rich nations say that demand growth will remain healthy for the rest of 2017. This may help bring a balance in the global oil market because it is expected that OPEC will extend its six-month production freeze when the cartel meets next month in Vienna. However, analysts argue that there has been tepid demand for gasoline, which may leave refiners with additional fuel stockpiles.

The market is in anticipation for the weekly industry reports from the American Petroleum Institute (API) on Tuesday and the Energy Information Administration (EIA) on Wednesday.

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