Oil Slides as US Climate Withdrawal Compounds Glut Concerns

Oil prices tumbled below $50 on Friday amid worries that U.S. President Donald Trump's decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply.

West Texas Intermediate for July delivery lost as much as 86 cents to $47.50 a barrel on the New York Mercantile Exchange, and was at $47.54 at 7:50 a.m.in Hong Kong.

Some commodity markets were also absorbing news that President Donald Trump said he would withdraw the United States from the landmark 2015 global agreement to fight climate change, a move that fulfilled a major campaign pledge but drew condemnation from USA allies and business leaders.

But rising production from the United States has so far undermined its efforts to reduce bloated global inventories to the five-year average.

President Trump's withdrawal is unlikely to support oil prices. While U.S. stockpiles have edged lower, rising American production and drilling is fanning concerns that OPEC's efforts to trim a global glut will be hampered.

Members of the Organization of the Petroleum Exporting Countries (OPEC) May 25 renewed an agreement with 10 other crude-oil producers to limit output through March 2018.

The Financial Times on Friday reported that Igor Sechin, chief of Russia's largest oil producer Rosneft, said U.S. oil companies could add up to 1.5m b/d to global output next year, countering production curbs by Opec and producers outside of the cartel.

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Igor Sechin, chief of Russia's largest oil producer, Rosneft, said US producers could add up to 1.5 million bpd to world oil output next year.

Official data showed crude inventories in the United States, the world's top oil consumer, fell sharply last week as refining and exports surged to record highs.

Crude stockpiles were down by 6.4 million barrels in the week to May 26, beating analyst expectations for a decrease of 2.5 million barrels.

The price signal reflected other signs that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to curb production by nearly 1.8 million barrels per day (bpd) was starting to impact actual supplies. "If for some reason we need to do more, we will consider doing more including. bigger cuts".

"The market is testing OPEC for firmer action", said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland.

Analysts said the group is at risk of losing further market share to USA shale oil producers, which could cause compliance with the deal to slip in the second half of the year.

Prices came under renewed pressure during European trading with fresh consideration of President Trump's overnight decision to withdraw the U.S. from the 2015 Paris Climate Accord.

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