Oil prices fell the most in two months Tuesday, paring the biggest three-day rally in 25 years as speculation faded that OPEC might curb supply.
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Futures slipped 7.7 percent in New York after surging 27 percent in three days, the most since August 1990.
Prices rose Monday after the U.S. lowered production estimates and the Organization of Petroleum Exporting Countries said it's prepared to discuss "fair" prices with other producers, but the group also said it won't shoulder the burden of propping up prices on its own.
Crude will remain at $40 to $60 a barrel into 2016 as rising supplies outpace demand, according to Ian Taylor, chief executive officer of Vitol Group BV, the biggest independent oil trader. Iran plans to increase output by 1 million barrels a day within five months after sanctions against it are lifted, said Oil Minister Bijan Namdar Zanganeh.
"This market is primed for volatility," said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets. "I see us moving lower because there continues to be an overabundance of oil and that's not going to change anytime soon. It's hard to see the market take off again."
West Texas Intermediate for October delivery dropped $3.79 to close at $45.41 a barrel on the New York Mercantile Exchange. The contract settled at $49.20 on Monday, the highest level since July 21. The volume of all futures traded was more than twice the 100-day average.
Brent crude for October settlement decreased $4.59, or 8.5 percent, to end the session at $49.56 a barrel on the London-based ICE Futures Europe exchange.
A drop in a Chinese factory gauge to the lowest in three years prompted speculation that growth in the world's second-biggest oil-consuming economy is slowing.
The Energy Information Administration on Monday reduced its U.S. crude production estimates by as much as 130,000 barrels a day for the first five months of the year based on a new survey. The nation pumped about 9.44 million barrels of crude a day during the period, down from a previous estimate of 9.53 million.
"The EIA numbers [Monday] bamboozled the market and were the catalyst for the move higher," Stephen Schork, president of the Schork Group Inc. in Villanova, Pa., said by phone. "We're expecting a pullback in U.S. production going forward, but not from OPEC."
Nonmember nations would have to contribute to any effort to bolster prices, OPEC said in a monthly bulletin from its Vienna-based secretariat. The group said it will protect its own interests and that there is "no quick fix" for market instability.
"The fundamental part of the story hasn't changed," Helima Croft, chief commodities strategist at RBC Capital in New York, said by phone. "The OPEC magazine story was treated like it was something new, but they've been saying since November that they wouldn't cut alone."
The 12-member group may shift policy and reduce output to keep Brent crude above $50 a barrel if demand in emerging economies falters, Bank of America Corp. said Friday. Saudi Arabia, OPEC's biggest member and architect of the current strategy to defend market share, "cannot sustain its spending sub-$40 a barrel for very long," the bank said.
The oil-production surplus means stockpiles will keep expanding for "the next few quarters" and excess inventories won't clear until 2017 at the earliest, Vitol's Taylor said Tuesday in an interview.
Responding to lower oil prices, energy company ConocoPhillips said Tuesday that it is cutting around 1,810 jobs, or 10 percent of its workforce.
The company said the biggest proportion of the job cuts will be in North America. ConocoPhillips plans to eliminate more than 500 jobs in Houston, where it is based.
In a news release, ConocoPhillips said it's making the cuts because the energy industry is in a "dramatic downturn."
ConocoPhillips already has eliminated 1,000 jobs this year and had 18,100 employees on June 30. The company said in July that it lost $179 million in the second quarter because of the drop in oil prices. It said it was preparing for a period of lower and more volatile prices and also pared its spending forecasts.
ConocoPhillips stock declined $1.40, or 2.9 percent, to close Tuesday at $47.75.
Information for this article was contributed by Mark Shenk, Golnar Motevalli, Hashem Kalantari and Grant Smith of Bloomberg News and by The Associated Press.
Business on 09/02/2015