WTI Futures Settle Below $50 Per Barrel

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled lower Thursday afternoon following a two-session selloff that pressed West Texas Intermediate below the psychologically significant $50 per barrel (bbl) for the first time since November 2016, as building U.S. inventory and climbing production continued to spark long liquidation sales.

"The selloff was triggered by a combination of this big crude oil stock build and accumulation of length in the market that is being flushed out," said Andy Lipow, president of Lipow Oil Associates in Houston.

The most recent Commitment of Traders report published by the Commodity Futures Trading Commission shows noncommercial traders held net long position at 525,254 contracts as of Feb. 28, which declined 31,353 contracts from a record high week prior.

"These traders are exiting their positions because they want to limit their losses, and so this selloff could go on for some time since we continue to accumulate crude stocks during this seasonal maintenance," said Lipow.

"The market is in critical condition from a technical standpoint," said analyst Phil Flynn of Price Futures in Chicago. "The big build in crude inventories caught many people by surprise and we sold a lot of length."

On Wednesday, the Energy Information Administration reported an 8.2 million bbl build in U.S. crude stocks to a fresh record high of 526.4 million bbl during the week-ended March 3. It was the ninth consecutive weekly build in commercial crude oil inventory, which coincided with a 56,000 bpd increase in domestic crude production to a 9.088 million bpd better than one-year high.

At settlement, spot-month NYMEX April WTI futures were down $1.00 at $49.28 bbl, the lowest settlement since Nov. 29, 2016, the day before the Organization of the Petroleum Exporting Countries reached consensus to cut production by 1.2 million bpd to 32.5 million bpd during the first six-months of 2017. WTI briefly slipped below retracement support for the November-to-January rally of $48.72 bbl with a $48.59 better than three-month low on the spot continuation chart. Additional support is found at $47.18 bbl.

On the IntercontinentalExchange, May Brent crude oil futures tumbled $0.92 to $52.19 bbl, the lowest settlement since Nov. 30, while trimming a decline to a better than three-month spot low at $51.50. Brent's premium to WTI widened to a $2.91 bbl five-week high, and is expected to continue to widen on growing U.S. production while OPEC reins in output.

In products trade, NYMEX April ULSD futures fell 2.72 cents to settle at $1.5295 gallon, off a $1.5148 better than three-month low. NYMEX April RBOB futures settled down 2.83 cents at $1.6243 gallon, off a one-week low at $1.6067.

In currency trade, the dollar eased against the euro after European Central Bank President Mario Draghi said there's no need to further stimulate the euro-zone economy with additional bond-purchases and as traders await the February U.S. employment report due out on Friday from the Labor Department.

The market also awaits Baker Hughes, Inc.'s weekly rig count report, with the oil services firm expected to show more drilling activity. Drillers have added rigs in the oil patch every week since Nov. 4 with the exception of one-week in mid-January, with the number of active oil rigs in the United States at a 609 17-month high on March 3.

George Orwel can be reached at george.orwel@dtn.com