Oil fell as U.S. drilling continued to rise, undermining the potential for even an extended OPEC output-reduction deal to rebalance the market.
Futures lost as much as 1.9 percent in New York after gaining 0.6 percent last week. Producers added more oil rigs to U.S. fields, extending a drilling surge into a 10th month, Baker Hughes Inc. said on Friday. Saudi Arabia is ready to extend cuts if supplies stay above the five-year average, Energy Minister Khalid Al-Falih said in an interview on Bloomberg Television last week.
U.S. oil this month dropped below $50 a barrel for the first time this year as the nation’s near-record crude stockpiles and increasing production weighed on the output reductions by the Organization of Petroleum Exporting Countries and its allies. While OPEC won’t decide until May whether to prolong the curbs, energy ministers including Russia’s Alexander Novak will meet this weekend in Kuwait to discuss the deal’s progress.
“The solid weekly gain in U.S. oil rigs continues and the market sees that,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “OPEC can easily shoot itself in the foot if the cuts lift the long-dated WTI price, which will drive U.S. shale yet higher and stronger.”
West Texas Intermediate for April delivery, which expires Tuesday, fell as much as 94 cents to $47.84 a barrel on the New York Mercantile Exchange and was at $47.96 as of 1:02 p.m. in London. The more-actively traded May contract dropped as much as 1.7 percent. Total volume traded was about 7 percent below the 100-day average.
Brent for May settlement declined as much as 75 cents, or 1.5 percent, to $51.01 a barrel on the London-based ICE Futures Europe exchange. Prices last week gained 0.8 percent to end at $51.76. The global benchmark crude traded at a premium of $2.55 to May WTI.
See also: Bullish bets on crude cut by most ever as price falls below $50
U.S. drillers boosted the rig count by 14 to 631 last week, data from Baker Hughes showed. They have added 106 machines to fields this year. The nation’s crude output has climbed to 9.1 million barrels a day, the most since February last year, according to the Energy Information Administration.
OPEC and its allies improved their collective compliance with cuts last month as deeper reductions from members offset weaker implementation from other producers, according to two delegates familiar with the conclusions of a meeting in Vienna on Friday.
Libya’s crude shipments from Es Sider and Ras Lanuf ports will restart in one week to 10 days, Jadalla Alaokali, a board member at National Oil Corp., said by phone. The nation’s oil output has increased to 646,000 barrels a day from 621,000 on Sunday due to more production from Waha Oil Co., he said.
Shale oil production could rise more than expected if oil hits $70 to $80 a barrel, International Energy Agency Executive Director Fatih Birol said in a Bloomberg television interview. Oil demand will also continue to rise this year and in the next few years, he said.