Seoul: While oil is rebounding from its biggest weekly decline in two years, gains are still being limited by concern over a resurgence in US shale output.
Futures in New York were up about 1 per cent after tumbling 9.6 per cent last week. Prices are near $60 (Dh220) a barrel after data showed last week that American drillers raised the number of rigs exploring for oil to the highest since April 2015. That’s raising fears that a gain in US output will undermine OPEC’s efforts to clear a glut. Hedge funds scaled back bets on rising West Texas Intermediate crude by the most since August.
Last week’s tumble means crude has lost this year’s gains, after a global equity rout spread to commodities and as the US pumps out record volumes. Meanwhile, a weaker dollar that had driven oil’s advance in January has been rebounding this month, adding to weakness in prices. American drillers remain the biggest challenge to the Organisation of Petroleum Exporting Countries and its allies as they curtail output to prop up prices.
“Oil is paying the price for rising too quickly to levels that attracted increased US production,” said Ric Spooner, an analyst at CMC Markets in Sydney. “Traders are also nervous about recent financial market volatility and the stronger dollar.” WTI oil could fall to “the low $50s range if volatility persists,” he said.
WTI for March delivery added 64 cents to $59.84 a barrel on the New York Mercantile Exchange at 11:53am in Singapore. The contract slid $6.25 last week to close at $59.20, the lowest level since Dec. 22. Total volume traded was about 49 per cent above the 100-day average.
Brent for April settlement was at $63.34 a barrel on the London-based ICE Futures Europe exchange, up 55 cents. Prices dropped $5.79, or 8.4 per cent, to settle at $62.79 last week. The global benchmark crude traded at a $3.72 premium to April WTI.
The US oil rig count rose by 26, the most in a year, to 791 last week, Baker Hughes data showed on Friday. American weekly crude output topped 10 million barrels a day for the first time on record, and the government forecasts it will skyrocket to 11 million later this year. That means the US is now a top producer of the same calibre as Saudi Arabia and Russia.
Hedge funds reduced their WTI net-long position — the difference between bets on a price increase and wagers on a drop — by 4.7 per cent to 472,792 futures and options during the week ended Feb. 6, according to the US. Commodity Futures Trading Commission. Longs declined by 4.1 per cent. Shorts rose for a fourth week. Total positioning shrank the most in three months.