(Repeats earlier story with no changes to text)
By Devika Krishna Kumar
NEW YORK, March 9 Oil bulls trying to push the
crude market higher finally waved the white flag on Wednesday,
triggering the biggest rout in a year, on concerns that
stubbornly high inventory levels would persist despite supply
Prices had been locked in the tightest trading range in over
a decade as traders and speculators piled into bets that oil
prices would rise after the world's top producers cut output.
For weeks, they shrugged off record high inventories in the
United States until on Wednesday, the market finally blinked.
Global oil benchmark, Brent and U.S. crude's West
Texas Intermediate prices plunged more than 5 percent -
the biggest drop since February 2016 - an unwelcome reminder of
the darkest days of a two-year price war that left many U.S.
shale producers with beleaguered balance sheets.
The move also pushed trading volumes to the highest since
early December with over 430,000 contracts in Brent crude for
May delivery and more than 911,000 contracts of WTI for delivery
in April changing hands.
Industry players were divided on whether the price slide
would continue or be short-lived given producers' adherence to a
pledge to rein in output and prop up prices that have languished
for over two years owing to a glut.
"The high level of uncertainty that has kept the oil complex
trading in a relatively narrow trading range since late last
year has been replaced, at least for the moment, by a bearish
market sentiment," said Dominick Chirichella, senior partner at
the Energy Management Institute in New York.
"The discussion will now center around whether or not Saudi
Arabia is willing to give back market share to U.S. producers
... or are they ready for yet another round of the market share
So far, there has been no indication that Saudi and OPEC
would extend the cuts beyond what is announced or allow the U.S.
to claw some of its market share.
Suhail bin Mohammed al-Mazrouei, the energy minister for the
United Arab Emirates told Reuters on the sidelines of an
industry conference in Houston that the plunge in oil prices was
temporary and that prices would rise as OPEC complies with
Still, the rise in inventories was "a worry", he admitted.
Despite record exports in U.S. crude oil, inventories have
ballooned to a new high week after week, threatening a speedy
rebalancing of the market.
Saudi Oil Minister Khalid al-Falih even admitted on Tuesday
inventory drawdowns were taking longer than he had expected for
the first two months of the year.
The crash on Wednesday also tested key technical levels of
support established this year and dropped below their 100-day
moving averages - a key metric for chart watchers - for the
first time since the OPEC deal was announced.
"The move down is in oversold territory, but otherwise,
there is very little evidence that it will end," said Dean
Rogers, senior analyst at Kase & Company said of WTI.
A small upward correction might take place first, but odds
strongly favor a continued decline toward the next major target
at $48, he said, adding that for Brent, the move lower is poised
to continue to at least $52.60 and likely $51.60 and lower over
the next few days.
But for the long term, most market participants continue to
Trade in options - that give the holder the right to buy or
sell at a specific price - signaled that the market does not
expect prices to move much lower than current levels.
"Their (OPEC's) response may very well be a continuation of
co-operation to limit their oil production, perhaps for a little
longer than they had hoped and this should help keep a floor
under oil prices," said Fawad Razaqzada, technical analyst at
"Indeed, despite today's sharp sell-off, I remain bullish on
oil and still expect to see $60-$70 a barrel by the year end."
(Reporting by Devika Krishna Kumar in New York; additional
reporting by Catherine Ngai, Marianna Parraga and Liz Hampton;
Editing by Andrew Hay)