New York: Oil dropped from a three-week high amid speculation that increased US drilling will boost output, offsetting cuts by the Organisation of Petroleum Exporting Countries (Opec) and other producers.
Futures fell 1.1 per cent in New York after failing to extend Thursday’s 2 per cent rally. Rigs targeting crude in the US rose this week by 15 to 566, the highest since November 2015, according to Baker Hughes Inc data reported Friday. American crude output is the highest level since April, government data show. Oil supplies from Opec are plunging this month, according to tanker-tracker Petro-Logistics SA.
“We pushed to the upper end of the band and ran out of steam,” Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. “We’re probably going to consolidate and build up for another run higher. When prices move to the upper end of the range we run into a wall of fear that even if the promised cuts are made, they will be made up by higher production in North America.”
Last month’s pact between Opec and 11 other nations gave hope to a market stuck in a two-and-a-half-year slump. While Saudi Arabia says more than 80 per cent of the agreed cuts have been implemented, analysts and investors are waiting for data to gauge the extent of the decrease. The International Energy Agency says rising prices will spur US shale output, and drillers are adding more rigs.
West Texas Intermediate for March delivery fell 61 cents to $53.17 a barrel on the New York Mercantile Exchange on Friday. Total volume traded was about 25 per cent below the 100-day average.
Brent for March settlement dropped 72 cents, or 1.3 per cent, to $55.52 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.35 premium to WTI.
Energy shares slipped after Chevron Corp posted its first annual loss since at least 1980, signalling the difficulties faced by the world’s biggest oil companies as they struggle to emerge from the worst collapse in a generation. The S&P Oil & Gas Exploration and Production Select Industry index fell 1 per cent.
US crude output climbed by 17,000 barrels a day to 8.96 million in the week ended January 20, according to an Energy Information Administration report on Wednesday. Rigs targeting crude have risen by 250 to 566 since touching a seven-year low in May, according to Baker Hughes data.
A committee that was formed to monitor the production cuts will meet in Kuwait in mid-March, Boutarfa said in Algiers. Some countries haven’t yet made the full output reduction, but they will increase curbs over the coming months and all are “highly committed” to the deal, Kuwait’s Oil Minister Essam Al Marzouk said Wednesday.