West Texas Intermediate (WTI) prices dropped five percent to a $50 rate on Wednesday in its biggest dip since September 2015, according to Zero Hedge.
Reuters reported that the plunge came as U.S. inventories surge to record highs every week, fueling doubts about the effectiveness of the Organization of Petroleum Exporting Countries' strategy to curb production in order to deal with the global supply 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."
April futures for WTI prices tested at a $50.05, the economics blog ZH reported.
Wednesday was also the worst day for USO, the exchange-traded fund linked to oil prices, with put volume up to 220,000, compared to 47,000-57,000 on a regular trading day.
Brent barrel prices, considered to be the international benchmark, also dropped to $52.93 - the lowest it's been since December 8th of last year.
In November, the members of OPEC resolved to cut production by 1.2 million barrels per day to allow demand to catch up with supply in the first half of 2017. Eleven non-OPEC nations agreed to cut their production by an additional 600,000 bpd in total, though the countries' compliance to their commitments has been lower than that of the bloc.
Oil industry leaders have spent the week warning of new volatility in energy markets as American shale producers bring back production in lock-step with recovering prices. By the end of 2017, U.S. oil production is predicted to surpass nine million barrels per day.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More