Oil traded at its lowest in more than a week in New York on signs U.S. production is continuing to recover, undermining OPEC’s efforts to clear a global glut.
Futures dropped 0.7% in New York after falling 1% April 17. Crude output at major U.S. shale plays is forecast to climb to 5.2 million barrels a day in May, the highest since 2015, according to the Energy Information Administration’s monthly Drilling Productivity report. Drillers in the nation have added rigs for the past 13 weeks, data from Baker Hughes Inc. show.
Oil had rallied to more than $53 a barrel after some producing countries voiced support for prolonging a six-month supply-cut deal by the Organization of Petroleum Exporting Countries and its allies.
While U.S. shale output could come “roaring back” amid higher prices, stockpiles will start to drop significantly as the curbs by OPEC and its partners continue, Citigroup Inc. said in a report.
“OPEC compliance against rising U.S. production” remains the main theme in the market, said Tamas Varga, an analyst at PVM Oil Associates in London. “OPEC will need to take action at the next meeting in order to provide some kind of oil-price support.”
West Texas Intermediate for May delivery was at $52.26 a barrel on the New York Mercantile Exchange, down 39 cents, at 12:58 p.m. London time. That’s the lowest since April 10. Total volume traded was in line with the 100-day average. Prices lost 53 cents to $52.65 on April 17, the lowest close since April 7.
Brent for June settlement was down 50 cents at $54.86 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.15 premium to WTI for the same month. The global benchmark crude dropped 53 cents, or 1%, to $55.36 on April 17.
U.S. crude inventories probably shrank by 1.7 million barrels the week ended April 22, according to a Bloomberg News survey before an EIA report April 19. Stockpiles expanded to 535.5 million barrels at the end of March, the highest in weekly data compiled by Bloomberg since 1982.
• Oil producers are showing “very good” compliance with pledged production cuts, Saudi Energy Minister Khalid Al-Falih said April 17 in Riyadh. While global supplies are rising because of refinery maintenance, the market is rebalancing, he said.
• Citigroup said OPEC output cuts will be able to offset the response of U.S. producers to higher prices. Goldman Sachs Group Inc. has called for the market to be patient.
• Stockpiles at Cushing, Okla., the delivery point for WTI and the biggest U.S. oil-storage hub, fell by 570,000 barrels last week, according to a Bloomberg survey.