Oil closed near $46 a barrel in New York, back to levels last seen before the OPEC deal, as the shale revival appears to be making the group’s cuts ineffective.
After dipping below $44 Friday, futures pared this week’s decline to 6.3 percent. But, prices remain near their lowest since the Organization of Petroleum Exporting Countries signed a six-month deal to curb production in November. Meanwhile, shale drillers are pressing ahead with their longest expansion since 2011. Market volatility and trading volumes surged.
“What we’ve seen in terms of the rebound today is really just a bit of a correction following an oversold market over the past several days,” Michael Tran, a commodities strategist at RBC Capital Markets in New York, said by telephone.
OPEC’s curbs drove oil above $55 at the start of the year, encouraging U.S. producers to ramp up drilling. The result has been an 11-week expansion of American production, the longest run of gains since 2012. Prices are still more than 50 percent below their peak in 2014, when surging shale output triggered crude’s biggest collapse in a generation and left rival producers such as Saudi Arabia scrambling to protect market share.
Oil market volatility, as measured by the CBOE/Nymex Oil Volatility Index, jumped to the highest level since December. The U.S. benchmark’s 14-day relative strength index hovered near 30, signaling the commodity is oversold.
West Texas Intermediate for June delivery rose 70 cents, or 1.5 percent, to settle at $46.22 a barrel on the New York Mercantile Exchange. Total volume was about 70 percent above the 100-day average. The contract sank 4.8 percent Thursday.