Oil falls as rise in US drilling points to higher output

singapore — Oil prices fell on Monday as increased drilling in the United States pointed to more output, raising concerns about a return of oversupply.

US West Texas Intermediate (WTI) crude futures were at $62.14 a barrel at 0739 GMT, down 20 cents, or 0.3 per cent, from their previous close.

Brent crude futures were at $65.99 per barrel, down 22 cents, or 0.3 per cent.

Monday’s price falls in part reversed increases last Friday, which came on concerns over tensions in the Middle East. On a simple supply versus demand basis, however, oil markets are facing the possibility of a renewed glut after being in a slight deficit for much of last year. US drillers added four oil rigs in the week to March 16, bringing the total count to 800, the weekly Baker Hughes drilling report said on Friday. “Surging US production will hamper exponential growth in crude oil prices,” Singaporebased brokerage Phillip Futures said on Monday.

The US rig count, an early indicator of future output, is much higher than a year ago as energy companies have boosted spending. Thanks to the high drilling activity, US crude oil production has risen by more than a fifth since mid2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia. Only Russia produces more, at around 11 million bpd, although US output is expected to overtake Russia’s later this year as well.

Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts led by the Organisation of the Petroleum Exporting Countries (Opec) and Russia to curb supplies and bolster prices.

Amid Russia’s efforts to restrain output, Russian oil giant Rosneft said on Monday that its fourth quarter 2017 liquid hydrocarbon production reached 56.51 million tonnes, raising its full-year output by 7.3 per cent to 225.5 million tonnes, or 4.53 million bpd. — Reuters