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As U.S.Climate Withdrawal Compounds Glut Concerns, Oil Slides

As U.S.Climate Withdrawal Compounds Glut Concerns, Oil Slides
Based on worries that U.S. President Donald Trump's decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut, global brent crude tumbled below $50 on Friday, heading for a second straight week of losses.
Down $1.49 from the previous close, there was a fall of nearly 3 percent at $49.14 per barrel for benchmark Brent crude futures LCOc1. There was also a fall of $1.45 cents to $46.91 per barrel for U.S. West Texas Intermediate crude CLc1 futures.
Weekly losses of more than 5 percent was likely for both contracts.
Fears that U.S. oil production could expand even more rapidly were sparked and condemnation from Washington's allies were drawn by the U.S. withdrawal from the landmark 2015 global agreement to fight climate change.
"I think we will see a United States that is about to go crazy in terms of producing fossil fuels," said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. "Why wouldn't they ramp up production when producers like the U.S. have an open invite to do as they please?"
Straining OPEC's efforts to reduce global oversupply, U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels.
In order to extend a deal to cut 1.8 million bpd from the market until March 2018, the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers met in Vienna a week ago.
U.S. oil producers could add up to 1.5 million bpd to world oil output next year, said Igor Sechin, chief of Russia's largest oil producer, Rosneft, on Friday.
Since OPEC's May 25 decision to extend the cuts, oil prices are down some 10 percent.
Also undercutting attempts to limit production are rising output from OPEC members Nigeria and Libya, which are exempt from the output reduction deal.
OPEC could revisit the proposal should inventories remain high after it discussed reducing output by a further 1 to 1.5 percent last week.
And indicating that traders and investors are already protecting against a more aggressive drop in price once OPEC's joint supply deal expires, the demand for bearish puts expiring in March 2018 spiked on Friday.
And still, as refining and exports surged to record highs, official U.S. data showed crude inventories fell sharply last week which helped in providing some sort of support to the oil markets.
Compared with analysts' expectations for a fall of 2.5 million barrels, crude stockpiles were down by 6.4 million barrels in the week to May 26.

Christopher J. Mitchell

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