Crude oil prices plunged on Tuesday to finish the session at their lowest level in nearly five weeks as traders worried about OPEC’s production cut, according to Bloomberg MarketWatch.
On the New York Mercantile Exchange, February West Texas Intermediate crude fell by $1.14, or 2.2%, to settle at $50.82 a barrel.
On London’s ICE Futures Exchange, March Brent crude, the global benchmark, dropped $1.30, or 2.4%, to end trading at $53.64 a barrel. Futures prices for both crude benchmarks marked the lowest settlements since December 7.
The rising concerns that OPEC members and non-OPEC countries will fail “to fulfill their pledge to cut oil production have exposed WTI crude to steep losses,” said Lukman Otunuga, research analyst at FXTM.
With the OPEC production cut in effect for less than a month, many market participants have been unsure whether the agreement will be carried out and if participating producers will comply with their allotted quota.
OPEC is expected to release the January production data next month, which will give traders and investors a better idea on the compliance by oil producers.
In a monthly report issued on Tuesday, the U.S. Energy Information Administration forecast domestic oil production of 9 million barrels a day this year, up from an estimated 2016 output level of 8.89 million. It projected a further rise to 9.3 million barrels a day for 2018.
Late Tuesday, the American Petroleum Institute reported a rise in U.S. crude supplies that was slightly below some market expectations. API data revealed a rise of 1.5 million barrels in U.S. crude supplies for the week ending January 6. Supply data from the Energy Information Administration will be released Wednesday morning. Analysts polled by S&P Global Platts forecast an increase of 1.75 million barrels in crude oil stockpiles for the week ending January 6.
Meanwhile, natural gas futures rebounded from a 5.5% drop a day earlier. February natural gas added 17.5 cents, or 5.6%, to settle at $3.278 per million British thermal units on the New York Mercantile Exchange.