Oil is heading for a fifth weekly decline after sinking into a bear market on concerns that rising supply from the U.S. to Libya would offset production cuts from OPEC and its allies.
Futures regained some lost ground with a half percent rise in New York Friday, while remaining down 3.8 percent for the week. U.S. crude production has expanded above 9.35 million barrels a day, Libya is pumping the most in four years and oil stored in tankers rose to a 2017 high earlier this month. A committee tasked with monitoring compliance to the OPEC-led cuts gave only cursory attention to the possibility of deepening existing curbs, according to delegates familiar with the meeting this week.
“It’s becoming bearish mania. I think they’re overdoing it,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “If we keep going down, we’re not going to be adding rigs in a few months, we’re not going to be adding production.”
Oil in New York and London tumbled into a bear market this week on concerns that expanding global supply will counter reductions from the Organization of Petroleum Exporting Countries and its partners including Russia. Rigs drilling for oil in the U.S. are at their highest since April 2015, according to data from Baker Hughes Inc. The latest weekly data will be released at 1 p.m. New York time.
West Texas Intermediate for August delivery was at $42.95 a barrel, up 21 cents, on the New York Mercantile Exchange at 10:26 a.m. in New York. Total volume traded was about 25 percent below the 100-day average. Prices have fallen 21 percent from their peak in February; a bear market is defined as at least a 20 percent drop.
Brent for August settlement was at $45.46 a barrel on the London-based ICE Futures Europe exchange, up 24 cents. The global benchmark crude traded at a premium of $2.51 to WTI.
U.S. oil production rose by 20,000 barrels a day last week to 9.35 million, the Energy Information Administration reported Wednesday. While crude stockpiles slid by 2.45 million barrels to 509.1 million, a steeper decline than forecast in a Bloomberg survey, inventories remain about 100 million barrels above the five-year average.
“The futures curve may have reached a point when it no longer makes sense for U.S. drillers to add rigs,” said Bjarne Schieldrop, chief analyst, commodities at SEB Markets. “The revival in Libya oil production, the fact that OPEC and non-OPEC are relatively quiet when it comes to implementing deeper cuts, have been ammunition for the bears.”
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