Oil prices tanked in Wednesday’s trade, poised to snap their longest run of gains since 2010 after Russia ruled out any proposals to deepen the OPEC-led production cuts.
Oil prices were “exposed to heavy losses on Wednesday after reports of Russia opposing any further supply cuts attracted a school of sellers to attack,” said Lukman Otunuga, research analyst at FXTM, in a note.
On Monday, WTI ended higher for an eighth straight trading day, scoring its longest streak of wins since January 2010, when the market rose for 10 straight sessions, according to FactSet data. Over the period, it gained just over $4.50 a barrel, or roughly close to 11%.
September Brent oil LCOU7, -3.45% slumped $1.54, or 3.1%, to $48.07 a barrel Wednesday on ICE Futures Europe, building on a 7-cent loss from Tuesday.
Futures prices had traded in tight ranges earlier in Wednesday’s session, but were sent sharply lower after Bloomberg reported that Russia opposes any further restrictions on oil supply other than the ones already agreed. The Organization of the Petroleum Exporting Countries and a group of non-cartel members—including Russia—in May agreed to extend a deal to cut production into the first quarter of 2018.
“Following a strong rally in just eight days, the market is taking stock with news apart from those stemming from the U.S. having been mostly price-negative during the past week,” said Ole Hansen, head of commodity strategy at Saxo Bank, in emailed comments. That news includes “rising OPEC production due to Libya and Nigeria combined with Russia shooting down any hopes of further cuts.”
“$50 on Brent proved one bridge too far to cross at this stage,” said Hansen.
After oil prices in June dropped to pre-OPEC-deal levels, speculation rose that the major oil producers could extend the accord even further or deepen the cuts. But according to the Bloomberg report, citing Russian government officials, Russia thinks any further supply curbs would send the wrong message to the market and suggest the current pact isn’t doing enough.
Read: Oil to rally 20% before year’s end—the case from a UBS analyst
Six months into the OPEC-led cuts, which began at the start of the year, the oil market showed early signs of rebalancing in the second quarter and is expected to improve even further in the second half of the year. Fatih Birol, executive director of the International Energy Agency, however, warned on Tuesday that output increases among key OPEC producers such as Libya and Nigeria—that are exempt from the pact—could jeopardize the efforts to make a dent in the global oversupply, according to Reuters.
Meanwhile, traders are looking ahead to the weekly U.S. petroleum supply and production data.
The Energy Information Administration will release its figures on Thursday, a day later than usual because of Tuesday’s Independence Day holiday. The American Petroleum Institute’s report is due out late Wednesday.
Analysts at Citi Futures expect the EIA to report a decline of between 2 million and 3 million barrels in crude stockpiles for the week ended June 30.
“The recent [oil] rally was looking over-extended and a sell-off was almost inevitable given that nothing had changed fundamentally,” said Fawad Razaqzada, technical analyst at Forex. “I now think that the selling may have gone too far for today’s session, so we may see oil prices stabilize a little ahead of the crude inventories data.”
In other energy trading Wednesday, August gasoline RBQ7, -2.23% slid 2.6 cents, or 1.7%, to $1.509 a gallon, while August heating oil HOQ7, -2.25% lost 2.7 cents, or 1.8%, to $1.486 a gallon.
August natural gas NGQ17, -3.80% shed 9.5 cents, or 3.2%, to $2.856 per million British thermal units.