Tokyo - Oil slipped as US explorers resumed their drilling binge, raising concerns over whether output cuts by OPEC and its allies will be enough to clear a glut despite a pledge from Russia that it’s committed to the curbs.
Futures in New York fell 0.3% after data showed American producers added working oil rigs for the seventh time in eight weeks. Output also continued to grow, touching a record 10.4 million barrels a day last week. Meanwhile, Russia’s assurance that the world’s biggest crude producer will prolong production cuts into 2019 if necessary failed to assuage fears over surging US supplies.
Oil has been trading in a tight range near $60 this month as investors assess a shale boom, concerns about a trade war sparked by US President Donald Trump and expectations that Venezuelan output will plunge.
Rising American crude production is prompting speculation that a deal between OPEC and its partners would need to be extended well into 2019 to reach the group’s goal of reducing inventories to their five-year average.
"There are signs that US crude production continues to be steady, and that will offset OPEC’s effort to some extent," Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National, said by phone from Tokyo. Still, "oil prices are underpinned by Russia’s comment that raised expectations OPEC and some non-OPEC producers will keep commitment to supply cuts to the end."
West Texas Intermediate for April delivery, which expires on Tuesday, fell as much as 38 cents to $61.96 a barrel on the New York Mercantile Exchange and traded at $62.14 at 4:28 pm in Tokyo.
The contract rose $1.15 to $62.34 on Friday, driving futures to a 0.5% weekly gain. Total volume traded was about 43% below the 100-day average.
Brent for May settlement fell 25 cents to $65.96 a barrel on the London-based ICE Futures Europe exchange. The contract climbed $1.09 to $66.21 on Friday. The global benchmark traded at a $3.77 premium to WTI for the same month.
Russia is committed to seeing the pact through to completion, whether that means starting discussions about an exit strategy at the next meeting in June or prolonging the cuts into 2019, Energy Minister Alexander Novak said in a Bloomberg television interview in Moscow. When the time is right to end the production curbs, he said it should be done gradually, echoing comments from his Saudi counterpart earlier this month.
Investors also weighed the US’s rising presence in oil markets even as Russia’s Novak said he isn’t worried about the growth in shale. US crude explorers added four working rigs last week, bringing the total to 800, according to Baker Hughes data released Friday.
Other oil-market news:
As China seeks to establish a global oil benchmark at home, it wants to prevent a speculative bubble in its upcoming crude futures. Iraq’s Basra oil output will reach 3.5 million barrels a day by the end of this year from current 3.15 million barrels a day, Ihsan Abdul Jabbar, director-general of Basra Oil, says in interview in southern city of Basra.
Total will pay $1.45bn for stakes in two offshore oil fields in Abu Dhabi, extending a decades-long partnership as the Middle Eastern emirate seeks to expand production capacity.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER