Oil Trades Near Two-Month Low as Drilling Increases Amid Surplus
Oil traded near the lowest close in more than two months as U.S. producers increased drilling for a fourth week even as the market contends with abundant supplies.
Futures fell 0.3 percent in New York after slipping 3.8 percent last week. U.S. oil explorers boosted the number of rigs in action by 14 to 371 for the longest run of gains since August, Baker Hughes Inc. said Friday. Hedge funds and other money managers added the most bets in a year on lower West Texas Intermediate prices, according to U.S. Commodity Futures Trading Commission data.
Crude has moved lower since reaching almost $52 a barrel in early June. Prices are still almost 70 percent above February’s 12-year low as output disruptions added to speculation that the worst of the market rout is over. While the global oversupply has faded, high inventories of both crude oil and refined fuels coupled with signs of faltering demand growth have stifled the price recovery.
“Fears about the fragile state of the global economy as well as the oversupplied nature of the oil market are the reasons behind last week’s dismal performance” for prices, Tamas Varga, an analyst at PVM Oil Associates Ltd. in London, said in a report. “The global crude oil glut seems to have turned into a product glut.”
WTI for September delivery was at $44.03 a barrel on the New York Mercantile Exchange, down 16 cents, at 9:56 a.m. London time. The contract lost 1.3 percent to $44.19 on Friday, the lowest close since May 9. Total volume traded was about 23 percent below the 100-day average.
Brent for September settlement slipped 13 cents to $45.56 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 51 cents to $45.69 on Friday, capping a 4 percent decline for the week. The global benchmark crude traded at a premium of $1.53 to WTI.
Drillers added the most rigs last week since December, according to Baker Hughes. Machines have been put back to work in seven of the past eight weeks. U.S. crude production has halted its slide, increasing for a second week through July 15, according to data from the Energy Information Administration.
- Hedge funds’ net-long position in WTI fell by 23,665 futures and options combined to 156,804, CFTC data showed. Shorts surged 24 percent.
- Libya’s National Oil Corp. won’t lift force majeure at export terminals if a payment is made to the Petroleum Facilities Guard because this would encourage extortion, Reuters reported, citing a letter from NOC Chairman Mustafa Sanalla.