Oil fell for the first time in three days after US drillers added the most rigs in more than three years, making it difficult for Opec to drain global oversupply.
Futures fell 0.9% in New York. Companies in the US put 29 more oil rigs to work in the week ended Jan. 20, the most since April 2013, data from Baker Hughes Inc. show. Opec and other producers have cut oil supply by 1.5 million barrels a day, more than 80% of their collective target, since a deal to trim output took effect on Jan. 1, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in Vienna.
Oil has held above $50 a barrel since the Organization of Petroleum Exporting Countries and Russia agreed late last year to curb supply. Saudi Arabia, Kuwait, Qatar, Algeria and Venezuela met counterparts from non-Opec nations Russia and Oman in Vienna to find a way to verify that the 24 signatories to their Dec. 10 accord are fulfilling pledges to remove a combined 1.8 million barrels a day for six months. Progress may be hindered by Libya and Nigeria’s plans to raise output, and the US, where shale production is predicted to rise.
“Prices at these levels allow shale producers to profit from increasing output,” Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, which oversees $133 billion of assets, said by telephone. “We’re seeing this reflected in the rising rig count and increases in 2017 investment plans.”
West Texas Intermediate for March delivery declined 47 cents to settle at $52.75 a barrel on the New York Mercantile Exchange. Total volume traded was about 37% below the 100-day average. The February contract expired Friday after rising 2% to $52.42.
Brent for March settlement dropped 26 cents to $55.23 a barrel on the London-based ICE Futures Europe exchange, closing at a $2.48 premium to WTI. The global benchmark contract climbed 2.5% to $55.49 on Friday.
Futures pared declines as the US dollar dropped. The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, slipped 0.7%. A weaker greenback increases investor interest in commodities denominated in the currency.
Energy shares declined with futures and were the worst performers on the Standard & Poor’s 500 Index. The S&P Oil & Gas Exploration and Production Select Industry index slipped 0.9%.
“The rising rig count will weigh on the market,” Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. “The fear has been that elevated prices will increase drilling activity, and that will raise production in the US and Canada.”
The seven countries meeting in Vienna intended to prove that Opec is serious about eliminating a global glut and to dispel skepticism stemming from previous unfulfilled promises. The committee will meet next on March 17 in Kuwait and again in May.
“Opec is trying to spin a yarn,” Haworth said. “Opec and its partners have agreed to a framework for measuring compliance, which is a positive development. If prices stay high, this agreement will be undercut in part by rising shale output. That’s how capitalism works.”
- US crude supplies probably climbed 2.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
- US drillers increased the total oil and gas rig count by 35 to 694 in the week ended Jan. 20, according to data from Baker Hughes.
- Saudi Arabia and Venezuela, Opec’s two biggest suppliers to the US, shrugged off a vow by President Donald Trump to end dependence on the group’s oil, saying the world’s biggest economy would continue to need crude from abroad.
- Iraq, currently pumping 4.35 million barrels a day, has cut supply by 180,000 barrels a day and plans to trim a further 30 000 barrels by the end of the month, Oil Minister Jabbar Al-Luaibi said in London.
© 2017 Bloomberg