U.S. crude oil prices fell below $49 a barrel on Thursday amid deteriorating gasoline futures and a higher dollar in the wake of European Central Bank’s latest interest rate decision.
Benchmark Brent and U.S. crude futures both fell about 2 percent, extending losses to fall below their 200-day moving averages. Both contracts have fallen in six of the last eight sessions, with only moderate gains on positive days.
OPEC and other major producers including Russia agreed in December to pump less oil to try to rein in a global glut weighing on prices. OPEC plans to decide at a meeting next month whether to extend its production cuts into the second half of the year.
Crude will probably drop to $40 a barrel or below unless OPEC and allied producers extend their collective cuts in output beyond June, according to analysts including the Abu Dhabi Investment Authority’s head of research.
The six-month cuts that took effect in January have set a floor for prices, but an increasing supply of U.S. shale oil together with record-high inventories are keeping the per-barrel price of crude from rising beyond the upper $50s, Christof Ruehl said Wednesday at a conference in Dubai.
“If OPEC and the coalition don’t extend the agreement to continue cuts, that price floor will go,” he said. “Without it, prices would fall, and there’s nothing to stop oil going below $40 a barrel.”
“The market is looking for a direction right now and ending the production cuts would be a negative for oil prices,” said Edward Bell, a commodities analyst at Dubai-based bank Emirates NBD PJSC. “Without a deal, oil could certainly be pushed below $40.”
A drop to $40 a barrel is “a clear option” should OPEC not agree to extend cuts next month, Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said Wednesday.