Oil prices fall 2% on signs market still oversupplied

Russia says ready to consider revising output deal parameters

LONDON: Oil prices fell more than 2 percent on Friday after data showed US production rose last week just as the Organization of the Petroleum Exporting Countries (OPEC) exports hit a 2017 high, casting doubt over efforts by producers to curb oversupply.

Global benchmark Brent futures were down $1.01, or 2 percent, at $47.10 a barrel at 1341 GMT, after falling to as low as $46.63, the weakest level in more than a week.

US West Texas Intermediate (WTI) crude futures traded at $44.53 a barrel, down 99 cents or 2.2 percent. Their session low of $44.05 was also the lowest in over a week.

“Bearish news from the supply side has dragged prices down. The spotlight seems to be on the problem of oversupply once again,” said Frank Schallenberger, head of commodity research at LBBW in Stuttgart.

Weekly US government data showed on Thursday that US oil production rose 1 percent to 9.34 million barrels per day (bpd), correcting a drop in the previous week that was down to one-off maintenance work and hurricane shutdowns.

The rise in US output coincides with exports from OPEC climbing for a second consecutive month in June to the highest level this year.

Russia, which is cooperating with OPEC in a deal to stem production, said on Friday it was ready to consider revising the parameters of the deal if need be.

A group of oil producing countries monitoring the output deal will meet on July 24 in Russia at which point they could recommend adjusting the pact.

OPEC sources welcomed Russia’s comments on Friday, saying they provided a good basis for discussions on deepening production cuts. The market largely ignored news from the US Energy Information Administration (EIA) that US crude inventories fell by 6.3 million barrels in the week to June 30 to 502.9 million barrels, the lowest since January.

The push-and-pull between bearish and bullish factors will keep volatility high, said Hans van Cleef, a senior energy economist at ABN Amro.

“In the near term, this leaves us with a volatile trading range of roughly $45-50 a barrel.”

If OPEC were unable to balance the market, change would likely be forced on it by oil prices, said Morgan Stanley. The US bank said a WTI price of $46 to $50 per barrel would likely prevent US production rising in the mid- to long-term, but prices need to be “in the low $40s” for US output to fall significantly.

Morgan Stanley said it expected WTI to remain below $50 until mid-2018.