- Crude, Brent oil prices dive sharply
- We’re seeing some ‘Get-Me-Out’ type trading – Andrew Lebow
- U.S. oil to hit 9m bpd by Q4 2017
- OPEC’s production cut having little impact
The U.S. West Texas Intermediate (WTI) crude dropped five percent to a $50 in stockpiles on Wednesday being the biggest dive since September 2015 according to spreads presented by Zero Hedge.
The deep drop resulted due to surge in U.S. inventories to record highs weekly, raising doubts on how effective the Organization of Petroleum Exporting Countries, OPEC’s strategy to curb production in order to push crude prices up and tame the already over saturated global oil glut.
“We’re seeing some ‘GMO trading’, or ‘Get-Me-Out’ type trading,” Andrew Lebow, from the Commodity Research Group in Darien, Connecticut, said in an interview.
“It’s a combination of an overhang of (speculative) length and the overhang in inventories … and the other thing unnerving the market is rapid growth in U.S. crude production.”
According to the economics blog Zero Hedge, April futures for WTI prices tested at a $50.05.
Trading on Wednesday was worst for the USO as the exchange-traded fund tied to oil prices was at a 220,000 volume in contrast to 57,000-57 which was constantly traded on usual trading days.
Also, Brent barrel prices which is the accepted as the major international benchmark dropped to some $52.93 – the lowest it had seen since December 8, 2016.
It will be recalled that OPEC members met in November to cut output production by 1.2 million barrels per day in order to allow demand meet-up with supply during the first half of 2017.
Some eleven members of OPEC gave consent to cut output by an additional 600,000 barrel per day even though the countries’ outright commitments to their stand has been lower than that of the bloc.
Leaders of the oil industry have the week sent warnings signaling new volatility in energy markets as American shale producers ramp production as prices up for recovery.
With shale producers boosting production in lock-step with recovering prices U.S. oil production is estimated to rise above nine million barrels per day by the end of 2017.