Oil edges down as US rig numbers go up

Brent crude futures for March delivery declined by about 2% to under USD 56 per barrel on Monday afternoon as US companies raised the number of operational rigs by almost 10% in December.

The average rig count in the US last month was 634, up from 580 in November though still less than the 714 average for December 2015, Baker Hughes announced on Monday.

“We see the optimism surrounding <a href=’https://theenergyyear.com/companies-institutions/opec/’>OPEC and non-OPEC production cuts being counterbalanced by fears of higher US crude production,” Hans van Cleef, an expert at ABN Amro, told Reuters.

The trend, moreover, was mirrored globally: According to the Baker Hughes report, an average of 1,772 rigs were operational worldwide last month, an increase from 1,678 in November but down from the December 2015 count of 1,969.

According to a separate Reuters report, Iran has sought to capitalise on the production-cut deal reached in late November and the subsequent increase of oil prices by selling some 13.2 million barrels of oil in recent months, or almost half the volume it had stockpiled aboard tankers at sea as of October.

Tehran is exempted from having to reduce its production because of international sanctions related to its nuclear programme that were repealed last year.

Nevertheless, producers including Saudi Arabia and Russia appear to have rolled back their output significantly, having cut some 486,000 bopd and 100,000 bopd, respectively.

According to Reuters, Russia is expected to cut an additional 200,000 bopd in Q1 of this year in order to meet the quota it had agreed on as part of the deal.

“Concerns regarding the sincerity, depth and duration of announced production cuts notwithstanding, most analysts, including us, see tighter-than-previously-envisaged balances for 2017,” JBC Energy analysts told Reuters.