Crude slips below $53 as United States drilling surge stokes output fears

Increasing U.S. output is proving a constant source of irritation to attempts by the Organization of the Petroleum Exporting Countries (OPEC) and other major oil producers to curb output and sustain a rally in prices in a market that has been oversupplied since mid-2014. Prices lost 53 cents to US$52.65 yesterday, the lowest close since April 7. Overall, however, the IEA said gains in crude oil prices are making US shale oil recover as operators respond to the improved market conditions.

Brent for June settlement dropped as much as 58 cents, or 1 percent, to $55.31 a barrel on the London-based ICE Futures Europe exchange.

More barrels could be on their way to market from US shale fields as financial companies are investing billions in production, a Reuters analysis showed.

Before the holidays, energy services provider Baker Hughes reported that the number of US rigs drilling for oil rose by 11 to 683 in the latest week.

Oil prices rose from around $51.20 to about $52.60 upon news that the United States military launched 59 missiles against an airbase in Syria, after the country's government allegedly used chemical weapons Tuesday in a rebel-held area.

Benchmark Brent crude futures were down 18 cents at $55.71 at 11:37 a.m. EDT while U.S. West Texas Intermediate (WTI) crude futures were down 23 cents at $52.95 a barrel.




USA drillers last week added rigs for a 13th straight week.

"So that gives the market pause at how effective they're going to be at taking oil out of the market". Vandana Hari, an industry analyst for Vanda Insights, said that some of the older data on global stocks of oil isn't as helpful as weekly metrics. Some traders may also be disappointed by reported comments from Saudi Arabia's Energy Minister Khalid al-Falih, who said it's too early to talk about an extension to the production-cut agreement led by OPEC, he said.

It is now half time for the six-month oil production cuts agreed by Opec and eleven non-Opec countries and so far, the game has gone fairly well for producers, says the International Energy Agency (IEA) in a new report. While U.S. crude supplies fell from a record, OPEC said Wednesday in a report that rivals in the American shale patch are growing stronger.

The U.S. oil rig count climbed to 683 last week, the highest since April 2015 and a 13th week of gains, Baker Hughes data showed on Friday. "The amount of crude not being processed at the Riyadh refinery is reflected in the oil stockpiles in February as they increased from January".

Julian Lee, oil strategist for Bloomberg First Word, notes that "the grand re-balancing of supply and demand has yet to take place" and that "the OPEC output cut was also meant to usher in a period when demand would start running ahead of supply, and when inventories would be reduced".

(Copyright © 2015. All Rights Reserved.)
 
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