Oil erodes on Opec deal concerns
new york — Oil posted its biggest weekly drop in four weeks amid questions over the effectiveness of the Opec’s deal to help rebalance the market as US production continues to grow.
Futures slid 1.5 per cent in New York. Russia’s most powerful oil boss said output curbs by the Opec and its partners probably won’t succeed over the long term as US shale fills the supply shortfall. While US government data on Thursday showed crude inventories declined last week, rising exports and production, and a jump in the oil rig count, suggest the glut will linger.
“There were some stark comments from the Rosneft CEO who said that there is a plan by producers to flood the market with oil,” John Kilduff, a partner at Again Capital, a New York-based hedge fund, said. “His comments certainly registered with the market. As you look back now at the deal, it looks increasingly lame.”
Opec-led production cuts could be offset by US shale by the middle of next year, Rosneft Oil CEO Igor Sechin said at the St Petersburg International Economic Forum. Sechin, a close ally of President Vladimir Putin, expects shale oil output to rise by about 1.5 million barrels a day in 2018, near the cut targeted by Opec and its allies.
West Texas Intermediate for July delivery fell 70 cents to settle at $47.66 a barrel on the New York Mercantile Exchange. Total volume traded was about 27 per cent above the 100-day average. Prices fell 4.3 per cent last week, the biggest weekly decline since the week ended May 5.
Brent for August settlement fell 68 cents to end the session at $49.95 a barrel on the Londonbased ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.08 to August WTI.
Oil slipped below $50 a barrel last week as the agreement by the Organisation of Petroleum Exporting Countries and its allies to prolong output curbs for nine months disappointed some investors hoping for deeper cuts. While US stockpiles have edged lower, rising American production and drilling is sowing doubt over Opec’s efforts to trim a global glut.
While US crude inventories fell by 6.43 million barrels last week, according to Energy Information Administration data, US production rose for the 14th time in 15 weeks, by 22,000 barrels a day to 9.34 million. The US oil rig count climbed by 11 to 733 rigs, the highest level since April 2015, according to data published on Friday by Baker Hughes.
The price of oil could have dropped much more if Opec and its partners hadn’t extended output caps into 2018, Russian Energy Minister Alexander Novak said in an interview with Bloomberg TV at the St Petersburg International Economic Forum. Participants in the deal have tools to act if necessary to shorten or extend supply curbs, he said.