Oil prices extend losing streak as failed rally hardens bearish mood

Oil extended declines to hover near a five-month low as a brief relief rally fizzled, with low-conviction trading and mounting concerns about excess supplies leaving algorithmic traders calling the shots.

West Texas Intermediate inched down to settle near $69 a barrel, bringing its loss to 11% over the past six sessions, the longest run of daily losses since February. Global benchmark Brent settled around $74, the lowest since June.

The commodity rallied earlier in the session after dipping into oversold territory on its nine-day relative strength index, a technical signal that often precedes a rebound. The gain quickly faded, with bearish sentiment pushing many market participants to the sidelines, leaving the commodity to take cues from broader markets and algorithmic investors. Trend-following commodity trading advisers drove Brent lower after prices breached $74.50, where many selling programs were positioned.

“Technical bounces we see are low conviction and may lack staying power until there is a positive catalyst that sparks a significant short-covering rally,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth.

In a sign there’s too much of some types of oil, key spreads are trading in a bearish contango structure. Traders have been expecting high crude exports from the US and other non-OPEC producers, adding to greater volumes of lighter barrels across the globe. That has so far blunted the effect of a decision by producers in the OPEC+ group to curb output into 2024.

Crude’s slide is also having wider ramifications. It has helped drag an overall commodity gauge to the lowest since 2021 while also pushing Russia’s key crude grade below a Group of Seven price cap for the first time since July. Still, the country’s cuts in crude oil production last month fell short of the nation’s pledge.

A procession of OPEC+ producers have made the case that their latest agreement will stick and could be extended. Saudi Arabia said earlier this week that cuts can “absolutely” stay past March, followed by similar remarks from Russia, Algeria and Kuwait.

Traders are also awaiting a US jobs report set to be released on Friday as some speculate that bets on rate cuts by major central banks have gone too far.