Oil down on US output increase
LONDON, April 23, 2018 – Crude prices started the week in negative territory on Monday, as market players continued to weigh a steady increase in U.S. production levels against ongoing efforts by major global crude producers to reduce a supply glut.
New York-traded West Texas Intermediate crude futures lost 29 cents, or 0.4%, to $68.12 a barrel by 4:10AM ET (0810GMT).
Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., dipped 25 cents, or 0.3%, to $73.83 a barrel.
Both benchmarks notched their second straight weekly gain, with WTI rising about 1.5%, while Brent saw a weekly increase of around 2%, as geopolitical tension in the Middle East and concerns about supply disruptions in key oil-producing nations supported the market.
But a rise in U.S. drilling for new production marked one of the few factors tamping back crude in an otherwise bullish environment.
U.S. drillers added five oil rigs in the week to April 20, bringing the total count to 820, General Electric (NYSE:GE)’s Baker Hughes energy services firm said in its closely followed report on Friday.
That was the highest number since March 2015, underscoring worries about rising U.S. output.
Indeed, domestic oil production – driven by shale extraction – rose to an all-time high of 10.54 million barrels per day (bpd) last week, the Energy Information Administration (EIA) said. Only Russia produces more at almost 11 million bpd.
Analysts and traders have recently warned that booming U.S. shale oil production could potentially derail OPEC‘s effort to end a supply glut.
OPEC and 10 producers outside the cartel, including Russia, have been holding back oil output by around 1.8 million bpd since the start of last year to slash global inventories to the five year-average. The arrangement is set to expire at the end of 2018.
The cartel will meet in June to decide whether the production-cut agreement should be adjusted based on market conditions.
In the week ahead, oil traders will await fresh data on U.S. commercial crude inventories on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.
Comments from global oil producers for additional signals on whether they plan to extend their current production-cut agreement into next year will also remain on the forefront.
In other energy trading, gasoline futures inched up 0.2% to $2.089 a gallon, while heating oil slumped 0.3% to $2.117 a gallon.
Natural gas futures were steady at $2.765 per million British thermal units.
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