Oil fell as US drilling continued to rise, undermining the potential for even an extended OPEC output-reduction deal to rebalance the market.
Futures lost as much as 1.6 percent in New York after gaining 0.6 percent last week. Producers added more oil rigs to US fields, extending a drilling surge into a 10th month, Baker Hughes Inc. said. 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.
US 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 US 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 US shale yet higher and stronger.”
West Texas Intermediate for April delivery, which expires Tuesday, fell as much as 77 cents to $48.01 a barrel on the New York Mercantile Exchange and was at $48.20 as of 9:24 a.m. in London. The more-actively traded May contract dropped as much as 1.1 percent. Total volume traded was about 10 percent below the 100-day average.
Brent for May settlement declined as much as 71 cents, or 1.4 percent, to $51.05 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 $2.48 to May WTI.