Oil Tumbles Amid Oversupply Fears, Unlikelihood Of Deeper OPEC Cuts
NEW YORK, May 4 (Reuters) - Oil prices plunged to five-month lows on Thursday amid record trading volume in Brent crude, as OPEC and other producers appeared to rule out deeper supply cuts to reduce the world's persistent glut of crude.
Closing prices, below $50 a barrel, were the lowest since Nov. 29, thereby erasing all the market gains that followed a late 2016 announcement by the Organization of the Petroleum Exporting Countries it would cut output.
The slide steepened after the OPEC delegates downplayed the chance that their group and other producing countries would deepen their output cuts when they meet on May 25. They did say current output cuts were likely to be extended.
But analysts say non-OPEC members may struggle to extend production cuts.
U.S. crude ended the session 4.81 percent lower at $45.52 per barrel after falling as much as 5.29 percent to an intraday bottom of $45.29, the lowest since Nov. 29.
Brent crude settled at $48.38, or 4.75 percent lower, after tumbling as much as 5.17 percent during the session.
Front-month Brent crude trading volume rose to the highest on record with nearly 525,000 lots changing hands, according to Reuters data that extends back to 1988.
Front-month WTI volume rose to more than 898,000 contracts, the highest in nearly two months.
Commodity Trading Advisors were among those liquidating their contracts in the day, traders said.
"While the cartel is expected to extend a self-imposed production cap by another six months, it will be a challenge to convince several non-OPEC members to follow suit," said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics. "Persistent growth in US oil production ... will also make extensions of the OPEC cap beyond 2017 unlikely.”
There was also a sign of slowing energy demand in China, the world's second largest oil consumer, when a survey showed growth in that country's services sector in April was at its slowest in almost a year.
Both benchmarks tested major support levels, with U.S. crude falling well below the key price of $47.23, according to traders and analysts.
Dean Rogers, senior technical analyst at Kase & Co, said charts showed the next potential stalling points were $44.20 for WTI and $47.20 for Brent.
"Sustained closes below this levels would be extremely bearish for the long-term," he said.
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