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US crude drops to 8-week low, settling at $64.75, as US supply grows, OPEC mulls output hike

Key Points
  • U.S. crude production climbed in March to 10.47 million barrels per day, a monthly record, data from the Energy Information Administration showed last week.
  • U.S. drillers added two oil rigs in the week to June 1, bringing the total to 861, the most since March 2015, energy services firm Baker Hughes said on Friday. 
  • OPEC is expected to agree to raise output to cool the market amid worries over Iranian and Venezuelan supply.
Lucy Nicholson | Reuters

Oil prices slid on Monday, breaking below technical support levels as investors kept selling on growing U.S. production, possible global supply growth and nagging trade tensions.

U.S. light crude ended Monday's session down $1.06, or 1.6 percent, to 64.75 a barrel, its lowest closing price since April 9. Last week, the U.S. contract lost around 3 percent, adding to a near 5-percent decline from a week before.

"We are breaking key levels of support now," said Phillip Streible, analyst at RJO Futures in Chicago. "Once we started taking out $65.50 or so, it really started to accelerate. People are not really believing that the rally will continue," he said.

Benchmark Brent crude lost $1.50, or 2 percent, settling at $75.29, its weakest closing prices in nearly four weeks.

VIDEO1:3601:36
Oil market is bullish for crude

U.S. crude production climbed in March to 10.47 million barrels per day (bpd), a monthly record, data from the Energy Information Administration showed last week.

U.S. drillers added two oil rigs in the week to June 1, bringing the total to 861, the most since March 2015, energy services company Baker Hughes said on Friday. That was the eighth time drillers have added rigs in the past nine weeks.

"There's been lot of talk about U.S. production continuing to rise. And it feels like once we hit Memorial Day, we hit a seasonal peak" for prices, which "ran up until the start of the summer season, and then hit a summer doldrums," said Streible.

Last week, the week after Memorial Day, the U.S. contract lost about 3 percent after a decline of nearly 5 percent the previous week.

Data from market intelligence firm Genscape showed that between May 29 and June 1, crude inventories at Cushing, Oklahoma, rose by 210,046 barrels, a potentially bearish signal, traders who saw the data said.

Prices were also pressured by the expectation that The Organization of the Petroleum Exporting Countries (OPEC) would soon boost output.

VIDEO2:1902:19
Discussing the expectations ahead of the June 22 OPEC meeting

"We have about 18 days before we get an official OPEC announcement. And I think the market is just going to watch and wait here," said Brian Larose, technical analyst at ICAP-TA.

OPEC meets formally on June 22 to set oil policy. It is expected to agree to raise output to cool the market amid worries over Iranian and Venezuelan supply and after Washington raised concerns that the oil rally was going too far, OPEC sources familiar with the discussions told Reuters last month.

"The trade tariffs between EU, Mexico, and Canada and the friction with China are also weighing on crude oil," said Bill Baruch, president of Blue Line Futures in Chicago.

British Prime Minister Theresa May told U.S. President Donald Trump over the phone on Monday that U.S. tariffs on EU steel and aluminum were "unjustified."

Hedge funds and other money managers cut their bullish wagers on U.S. crude futures and options, according to data released on Friday.

— CNBC's Tom DiChristopher contributed to this story.