Oil dips as US drilling offsets tightening moves
SINGAPORE — Oil prices dipped on Monday as a relentless rise in US drilling undermined an Organization of the Petroleum Exporting Countries (OPEC)-led push to tighten supply.
Trading activity will be subdued on Monday due to public holidays in China, the United States and Britain.
Brent crude futures were trading down six cents at $52.09 per barrel at 0645 GMT.
US West Texas Intermediate crude futures were down eight cents at $49.72 per barrel.
OPEC and some non- OPEC producers agreed last week to extend a pledge to cut production by around 1.8 million barrels per day ( bpd) until the end of the first quarter of 2018. But the decision did not go as far as many investors had hoped and led to a heavy sell-off.
An initial agreement, in place since January, would have expired in June this year.
“The immediate market reaction to the May 25 OPEC decision is indicative of the weaker- than- expected impact production cuts had on bloated global crude stocks over H1 2017,” BMI Research said in a note.
Despite the ongoing cuts, oil prices have not risen much beyond $50 per barrel.
Much of OPEC’s success will depend on output in the United States, which is not participating in the cuts and where production has soared 10% since mid-2016 to over 9.30 million bpd, close to top producer levels Russia and Saudi Arabia. US drillers have added rigs for 19 straight weeks, to 722, the highest amount since April 2015 and the longest run of additions on record, according to energy services firm Baker Hughes, Inc. Even if the rig count did not rise further, Goldman Sachs said it estimates that US oil output “would increase by 785,000 bpd between 4Q16 and 4Q17 across the Permian, Eagle Ford, Bakken and Niobrara shale plays.”