Brent crude futures hit key technical support

As of 0849 BST front month Brent crude oil futures were down by 0.92% to $47.94 a barrel on the ICE, having hit a low overnight just a shade below $47.0 per barrel, which coincides with the lower bound of the upwards-sloping price channel which has been guiding futures higher over roughly the past year, technical analyst Jose Maria Rodriguez at Web Financial Group pointed out.

From a fundamental perspective, analysts at VTB Capital attributed the move to remarks from Russian president Vladimir Putin's press secretary Dmitry Peskov that the Kremlin has yet to decide whether to extend the 30 November OPEC pact for a coordinated reduction in output.

"Yet, as is often the case, this seems to be the proverbial last straw. The relentless growth of US crude production, as well as signs that monetary tightening in China is starting to take toll on growth there, means that a simple extension of the 30 November production cuts is unlikely to be sufficient to keep the oil market in balance in 2H17," they said.

Acting as a backdrop on the geopolitical front, the day before Putin said that Russia, Turkey and Iran had agreed on the need for 'safe zones' in Syria, an initiative he claimed had the support of the US president.

The drop in prices also comes amid market talk that hedge funds have been liquidating the 'long' positions they amassed at the turn of the year, that producers in OPEC have continued to produce more than expected and rising US oil output.

Data from the Energy Information Administration, the US Department of Energy's statistical arm, on 3 May, revealed an 11th straight week of increased American oil supplies to 9.3m barrels per day - the most since August 2015.

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