Crude oil falls as US drillers add new rigs, speculators cut long positions

Updated - January 16, 2018 at 01:49 PM.

crude

Crude prices fell over 1.5 per cent on Monday after US oil drillers added rigs to look for new production as producers adapt to cheaper crude, with speculators cutting positions betting on further price rises.

Brent crude futures were trading at $47.29 per barrel at 0200 GMT, down 72 cents, or 1.5 per cent, from their last settlement.

US West Texas Intermediate futures were down 80 cents, or 1.74 per cent, at $45.08 a barrel.

Oil drilling

Traders said the price falls on Monday and Friday were a result of increasing oil drilling activity in the United States, which indicated that producers can operate profitably around current levels.

“Each dollar is being used far more efficiently and, as a result, $50 oil appears much more palatable,” Barclays bank said in a note to clients.

US drillers added oil rigs for a tenth week in the past 11, according to a Baker Hughes rig count report on Friday. It was the longest streak without rig cuts since 2011.

Speculative oil traders also became less confident of higher oil prices, cutting their net long US crude futures and options positions for a second consecutive week last week, the US Commodity Futures Trading Commission (CFTC) had said on Friday.

Oil’s near 5-per cent price decline since September 8 partly reverses a 10-percent rally early in the month, which was fuelled by speculation that oil exporters could cap production.

Market stability

Algeria’s energy minister said there is a consensus among OPEC and non-OPEC members about the need to stabilise the oil market to support prices, state news agency APS had reported on Saturday.

OPEC Secretary-General Mohammed Barkindo told APS that OPEC was not seeking a definite price range for oil but rather “sustainable stability” for the market.

Moves towards clinching a global deal on stabilising crude output come five months after similar talks for a production freeze failed when Saudi Arabia insisted that Iran join the pact.

Output freeze

Tehran says it supports any measures to stabilise the market, but has stopped short of committing to output restraint before its production reaches 4 million barrels per day, the level at which it says it was pumping before the imposition of Western sanctions which were lifted last January.

Even if exporters agree on freezing output around current levels, analysts said that would do little to raise prices as most exporters are pumping out oil at or near record levels, and have adapted to do so at lower prices.

“Producers and service companies ... are well positioned to return to growth mode at much lower prices,” Barclays said.

Published on September 12, 2016 06:35