US oil poised for loss on record output

Also at the forefront of investors’ minds is Opec and its allies’ next step

Oil in New York headed for a second weekly loss as US output surged, pushing the American marker to near its weakest level in more than three years against global benchmark Brent.

West Texas Intermediate futures are down 1.5 per cent last week as pipeline bottlenecks in the Permian Basin add to pressure from unprecedented levels of US production. Brent crude was 1.5 per cent higher last week even as investors await news on whether Opec and its allies will agree to boost production. Some members are meeting in Kuwait this weekend to discuss matters related to the group.

WTI for July delivery traded at $66.87 (Dh245.41) a barrel on the New York Mercantile Exchange, down 17 cents, at 11:10am in London, after dropping 1.7 per cent on Thursday. Total volume traded yesterday was about 20 per cent below the 100-day average.

Brent for August settlement was little changed at $77.56 a barrel on the London-based ICE Futures Europe exchange. July futures expired Thursday after adding 9 cents to $77.59 a barrel. The global benchmark is at a $10.88 premium to WTI, having settled at the widest since February 2015 on Thursday.

Hedge funds invested in US oil are betting pipeline bottlenecks will make Texas crude even cheaper. The constraints mean WTI is unable to keep up with Brent, which climbed last month following President Donald Trump’s decision to reimpose sanctions on Iran, and as Venezuelan output plunged amid an economic crisis. The difference is giving trading giants an opportunity to export millions of barrels as shale output continues to surge.

Also at the forefront of investors’ minds is Opec and its allies’ next step on their agreement to curb output. Saudi Arabia and Russia said last week that they are considering boosting production to ease potential supply disruptions in Iran and Venezuela. The proposal is yet to be approved by other partners, and officials from some have said they aren’t in favour.

US crude production rose to 10.77 million barrels a day, the highest in weekly data going back to 1983, the Energy Information Administration said on Thursday. Output has risen for 14 straight weeks as drillers put more rigs to work.

Still, the incentive to export means the EIA report also showed a surprise decline of 3.62 million barrels in nationwide inventories.