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Oil extends losses to three month lows, tests slide

Oil prices were steady to soft after touching three-month lows on Monday, testing a slide that began last week when the market became less optimistic that OPEC's efforts to restrict output would reduce a global oil glut amid swelling U.S. supplies. Prices have fallen by more than 8 percent since last Monday, its biggest week-on-week drop in four months, and analysts said the slide may not have much further to run. After more than two months of reduced production from the Organization of the Petroleum Exporting Countries, the market is facing evidence that U.S. production remains high and global markets remain oversupplied. "There is growing skepticism that the production cut has been enacted long enough to take care of the overhang," said Gene McGillian, director of market research at Tradition Energy. "The longs who piled in last year are turning on the market because there seems to be a realization that a six-month agreement isn't long enough to rebalance the market. Brent crude futures LCOc1 fell 6 cents to $51.31 a barrel by 1:30 p.m. Eastern (1730 GMT), having earlier hit a session low of $50.85, the lowest level since Nov. 30.

U.S. West Texas Intermediate crude (WTI) CLc1 fell 17 cents to $48.32 a barrel. Goldman Sachs said in a note it remained "very confident" about commodity prices and maintained its price forecast of $57.50 for WTI in the second quarter. The slide could be the result of traders unwinding bullish long positions, and could slow as those positions are unwound, Tradition Energy's McGillian said.

U.S. drillers added oil rigs for an eighth consecutive week, Baker Hughes data showed on Friday, and they have announced ambitious production growth plans as they rebound from a two-year price war with OPEC. [RIG/U]OPEC and other major oil producers, including Russia, reached an agreement at the end of November to rein in production by almost 1.8 million barrels per day (bpd) in the first half of 2017. Russia's top oil major Rosneft warned that a recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war.

Although OPEC states have been complying with supply curbs, led by Saudi Arabia, it has not been enough to overshadow a rise in U.S. inventories to a new high. [EIA/S]"It will be interesting to see how OPEC rhetoric will evolve with this price correction. Is price the only consideration when it comes to the decision of extending cuts?" BNP Paribas global head of commodity strategy Harry Tchilinguirian told the Reuters Global Oil Forum. He added that OPEC's task was more difficult as it aimed to cut inventory levels rather than simply target a specific price. Money managers cut their net long positions in U.S. crude futures and options in the week to March 7.

Wall Street up as Fed raises rates, flags no changes to path

U.S. stocks were near session highs in afternoon trading on Wednesday after the Federal Reserve raised interest rates for the second time in three months, as expected. The Fed, which raised its target rate by 25 basis points to 0.75 to 1.00 percent, did not however flag any plan to accelerate the pace of monetary tightening, a concern that had lingered among some market participants. Markets were expecting the Fed's decision and traders had priced in more than a 90 percent chance of a quarter-point rate increase, according to federal funds futures."The concern heading into this meeting was that the Fed would show more urgency in increasing interest rates beyond three rate hikes. The statement and the forecast ... imply that they're staying the course," said Frances Donald, senior economist at Manulife Asset Management in Toronto."The additional risk of moving more hawkishly doesn't seem to be present here."

The Dow Jones Industrial Average . DJI rose 124.5 points, or 0.6 percent, to 20,961.87, the S&P 500 . SPX gained 22.5 points, or 0.95 percent, to 2,387.95 and the Nasdaq Composite . IXIC added 50.81 points, or 0.87 percent, to 5,907.63. Financials on the S&P 500 . SPSY were the worst-performing sector while real estate . SPLRCR, up 2.2 percent, was on track to post its largest daily gain since branching out as the 11th S&P sector last September. U.S. retail sales recorded their smallest gain in six months in February, setting U.S. gross domestic product on track to grow at a 0.8 percent annualized pace in the first quarter, according to the Atlanta Fed's latest forecast.

Energy stocks boosted the S&P 500 as oil prices rose for the first time in more than a week on a surprise drawdown in U.S. crude inventories. U.S. crude CLc1 gained 2.4 percent to $48.84 per barrel and Brent LCOc1 added 1.8 percent to $51.85. Exxon shares (XOM. N) rose 1.2 percent and Chevron (CVX. N) added 1.4 percent.