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As the stock market opened on a relatively bright note to start the week April 24, among the day's biggest losers was the oil market. While stock indexes tended to fair well, boosted by favorable results from the closely watched presidential race in France, oil futures prices fell sharply. With hours to go until the end of the trading day, light sweet crude for June delivery was down 27 cents, falling below $50 per barrel for only the second time this year. Since hitting a one-month high of nearly $54 per barrel, prices have now fallen more than 8 percent in the following weeks.
This is hardly good news for the crop of money managers who made bullish bets that oil's price would rise, following news that OPEC's effort to stem production had so far been marginally successful. According to The Wall Street Journal, many investors had hopes that oil prices would reach or even exceed $60 within months.
What it would take to rally
However, continuing news about a supply glut has forced markets to react unfavorably to these bullish bets. Analysts have also seen continued evidence that production from U.S. oil firms is growing rapidly. Data released April 21 from Houston oilfield services firm Baker Hughes Inc. revealed operational drilling rigs in the U.S. were continuing their rapid climb above 850. Excluding natural gas rigs, oil production was recorded at 688 sites that week.
The oil market may need to wait at least another month before any firm answers can be given regarding global output and near-term prices. Bloomberg reported that OPEC plans to meet May 25 and discuss the effectiveness of its plans to reduce oil output, and whether to extend those cuts for another six months longer than planned. Even if OPEC leaders in Saudi Arabia do agree to continue their cutting efforts, it's unclear if Russia will follow suit. As a non-OPEC member, Russia agreed to the current drawdown plans but is under no obligation to extend them.
Even though oil prices remain hamstrung by weak market fundamentals, analysts did predict demand to stay strong as consumer sentiments rise throughout the world.
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