Oil slipped as U.S. 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 0.4 percent after data showed American producers added oil rigs for the seventh time in eight weeks. U.S. output also continued to grow, touching a record 10.4 million barrels a day last week. Meanwhile, Russia’s assurance that it will prolong production cuts into 2019 if necessary failed to assuage fears over surging shale supplies.
Oil has been trading in a tight range near $60 this month as investors assess a shale boom, a possible trade war sparked by U.S. President Donald Trump and expectations that Venezuelan output will plunge. Rising American crude production is prompting speculation that the 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.
“Initial weakness was spurred by the unrelenting march higher in U.S. shale supply,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
West Texas Intermediate for April delivery, which expires on Tuesday, fell as much as 40 cents to $61.94 a barrel on the New York Mercantile Exchange and traded at $62.08 as of 10:04 a.m. London time. The contract rose $1.15 to $62.34 on Friday, driving futures to a 0.5 percent weekly gain. Total volume traded Monday was about 45 percent below the 100-day average.
Brent for May settlement fell 24 cents to $65.97 a barrel on the London-based ICE Futures Europe exchange, after climbing $1.09 on Friday. The global benchmark traded at a $3.83 premium to WTI for the same month.
Russia is committed to seeing the output-cuts accord through to completion, whether that means starting discussions about an exit strategy at a scheduled meeting in June or prolonging the curbs into 2019, Energy Minister Alexander Novak said in a Bloomberg television interview. When the time is right to end the cuts, it should be done gradually, he said, echoing comments from his Saudi counterpart earlier this month.
While Novak said he isn’t worried about the growth in shale, investors weighed the U.S.’s growing presence in oil markets. U.S. crude explorers added four 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, up from 3.15 million a day currently, Ihsan Abdul Jabbar, director-general of Basra Oil Co., said in an interview. Total SA will pay $1.45 billion 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.