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Oil Tumbles 5% on Russian Silence Over OPEC; Huge U.S. Draw Little Help

06/12/2018 16:47:15 Commodities

At any other time, a 7-million-barrel weekly drawdown in U.S. crude inventories would have sent crude prices surging. But not when the Russians are maintaining an elegant silence on production cuts that has OPEC, and oil-dependent economies all over, at their mercy.

U.S. WTI was up $2.68, or 5.1%, at $50.21 per barrel by 11:33 AM ET (16:33 GMT) as OPEC awaited to hear from Russia on what the cartel should announce at its meeting in Vienna as target for production cuts aimed at propping up crude prices.

Brent fell $2.89, or 4.7%, to $58.67.

Crude stockpiles in the United States plunged last week for the first time in 11 weeks, the Energy Information Administration said, announcing a drawdown of 7.3 million barrels in the week ended Nov. 30, compared with analysts’ expectations for a decrease of just 942,000 barrels.

"It's a bullish draw number but the market's attention is totally on OPEC," said Tariq Zahir, managing member at Tyche Capital Advisors, an oil-focused fund in New York. "The Russians are looking like they don't want to give in to a big cut. There's also a huge risk-off on Wall Street that's adding to the heat on oil."

Reuters quoted two sources as saying OPEC had a tentative production-cut deal, but needed Russia's concurrence and contribution to the plan. Russia's Energy Minister Alexander Novak flew back to Moscow from Vienna to get President Vladimir Putin's assent and will return to the Austrian capital on Friday with a decision, reports said.

The Dow's plunge added to the weight on oil as equity markets tanked after the arrest of a top executive at Chinese company Huawei Technologies sparked fresh worry over Sino-U.S. trade tensions.

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