NEW YORK, March 21 — Oil fell as a Libyan port is set to resume shipments and the US drilling revival undermines the potential for Opec output curbs to rebalance the market.
Futures dropped 1.2 per cent in New York. Saudi Arabian Energy Minister Khalid Al-Falih said on March 16 that the kingdom may extend its cuts if supplies stay above the five-year average. A day later, though, data showed the US rig count growing for a ninth week, and a Libya official said Sunday that the Es Sider and Ras Lanuf ports are preparing to restart oil exports.
US oil prices dipped below US$50 (RM221) a barrel for the first time in 2017 this month as near-record American stockpiles and rising output weighed on the production reductions by Opec and its allies.
While the Organisation of Petroleum Exporting Countries won’t decide until May whether to prolong the cuts, ministers including Russia’s Alexander Novak will meet this weekend in Kuwait to discuss the deal’s progress. Money managers cut net-long positions on oil by a record.
“The reopening of the Libyan ports is the reason for today’s drop and the US rig count doesn’t help," Bob Yawger, director of the futures division at Mizuho Securities USA Inc in New York, said by telephone. "The drop in net-length is a signal from speculators that the market is vulnerable.”
West Texas Intermediate for April delivery, which expires today, fell 56 cents to settle at US$48.22 a barrel on the New York Mercantile Exchange. The more-actively traded May contract dropped 40 cents to US$48.91. Total volume traded was about four per cent below the 100-day average.
Brent for May settlement slipped 14 cents to US$51.62 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a US$2.71 premium to May WTI, the widest since January.
Futures briefly pared losses after Reuters reported that Opec producers increasingly favour extending production cuts into the second half of the year.
“This is probably a short blip,” Michael Cohen, head of energy commodities research at Barclays in New York, said by telephone. “This spread isn’t sustainable. Our forecast is that WTI will go from a US$2 discount early this year to a discount of 50 cents in the second and third quarters.”
US oil 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.
The agency is projected to report that crude stockpiles rose 3 million barrels last week, according to the median response in a Bloomberg survey.
“We’re in a very precarious position ahead of what should be an important report this Wednesday,” Yawger said. “We finally got an inventory drop in last week’s report but that came with a big drop in imports, that may have been temporary. The market can’t take another 2, 3 or 4 million barrel build without breaking it’s back."
Libya’s Es Sider and Ras Lanuf ports will restart shipping oil in one week to 10 days, Jadalla Alaokali, a board member at National Oil Corp., said by phone. The country’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.
Opec and its allies improved their collective compliance with cuts last month as deeper curbs from members offset weaker implementation from other producers, according to two delegates familiar with the conclusions of a meeting in Vienna on Friday.
Shale oil production could rise more than expected if oil hits US$70 to US$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. — Bloomberg