Oil dropped as OPEC’s production increased last month, at a time when U.S. drillers are also ramping up.
Futures fell as much as 3.1 percent in New York to the lowest level in more than a week. U.S. drilling has picked up steam, with shale explorers adding rigs last week for the first time since Aug. 11, indicating the recent rebound in oil prices might be encouraging activity. OPEC output rose in September, according to a Bloomberg survey. The dollar strengthened, also weighing on commodity prices.
“It’s coming out that OPEC’s oil output rose last month, another rise in the rig count. That’s all feeding in here to generating some downward pressure,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. Oil’s loss also comes as “we’ve seem some decent dollar strength.”
Oil returned to a bull market last week on signs that rising demand and production cuts by the Organization of Petroleum Exporting Countries’ and its allies are finally helping to cut into a global crude surplus. Prices also rallied after Turkey threatened to halt oil exports from Iraqi Kurdistan when the semi-autonomous territory voted for independence from the rest of Iraq.
“Everyone realizes crude oil is somehow strong, but probably has not enough fuel to go higher,” Johannes Benigni, managing director of JBC Energy GmbH, said in a Bloomberg Television interview. “There was first of all good support to bring prices higher -- you can name hurricanes, you can say Kurdish referendum, seasonality in middle distillates. But when you go forward, I would rather call it normalization.”
West Texas Intermediate for November delivery declined $1.41 to $50.26 a barrel at 11:39 a.m. on the New York Mercantile Exchange. Total volume traded was about 21% below the 100-day average. Prices climbed 9.4% in September, the biggest monthly increase since April 2016.
Brent for December settlement fell $1.07 to $55.72 a barrel on the London-based ICE Futures Europe exchange. The November contract expired Friday up 13 cents at $57.54. The global benchmark crude traded at a $5.12 premium to December WTI.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose as much as 0.5%. A stronger U.S. currency reduces the appeal of dollar-denominated raw materials as an investment.
Rigs targeting crude in the U.S. climbed by six last week, bringing the total to 750, according to Baker Hughes data reported Friday.