Oil plunges 5 percent on disappointment with OPEC cuts

Thu May 25, 2017 4:11pm EDT
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By Julia Simon

NEW YORK (Reuters) - Oil prices tumbled 5 percent on Thursday as the extension of output curbs by OPEC and other producing countries disappointed investors who had hoped for larger cuts, leading to the biggest daily percentage slide in crude prices since early March.

At Thursday's meeting in Vienna, the Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to extend supply cuts of 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.

Brent crude oil LCOc1 settled down $2.50, or 4.6 percent at $51.46 a barrel. U.S. West Texas intermediate crude futures CLc1 ended at $2.46 lower, or 4.8 percent, at $48.90 a barrel, breaking below $50 for the first time all week.

It was the biggest percentage decline for both benchmarks since March 8th. Since then, trading has been volatile.

While OPEC's move Thursday had been expected, some oil market investors had hoped producers would agree to longer or deeper cuts to drain a global glut of crude supplies. OPEC's move was greeted by a sell-off. The day's volumes of 1.1 million contracts of WTI were the highest since the Nov. 30 session, when OPEC first announced cuts.

"There was hope that there would be half a million extra barrels coming off," said Robert Yawger, director of energy futures at Mizuho Americas. He said the rally in recent days left few buyers to support futures once prices started to fall.

"Today the bottom evaporated from the market," he said.

The global crude glut has persisted even after OPEC agreed to cut production in the first half of the year. Futures markets activity shows a reduced expectation for the market to balance.   Continued...

FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada July 21, 2014.  REUTERS/Todd Korol/File Photo