Oil traded near $45 a barrel following a fourth weekly loss as U.S. drillers continued to add rigs and Libya boosted output, blunting OPEC-led efforts to rebalance an oversupplied market.
Futures were little changed in New York after capping the longest run of weekly declines since August 2015. U.S. drillers targeting crude added rigs for a 22nd straight week, the longest stretch in three decades, according to data Friday from Baker Hughes Inc. Libya is producing the most oil in four years after a deal with Wintershall AG enabled at least two fields to resume production.
Oil slumped to the lowest close in seven months on Thursday amid concerns that rising U.S. supplies will offset output cuts by the Organization of Petroleum Exporting Countries and allies including Russia. OPEC and its partners have curtailed production in an attempt to reduce bloated oil stockpiles to the five-year average, but increasing numbers of rigs in America, as well as rising output in Libya, is putting that target in jeopardy.
“The number of oil rigs continued to rise last week and the market needs to see at what oil price will we not have further rig activation in the U.S.,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “There seems to be very low conviction in the market that there really will be any inventory drawdown in the second half of the year.”
West Texas Intermediate for July delivery, which expires Tuesday, was at $44.75 a barrel on the New York Mercantile Exchange, up 1 cent, at 1:41 p.m. London time. Total volume traded was about 12 percent below the 100-day average. The contract gained 28 cents to $44.74 on Friday.
Brent for August settlement advanced 6 cents to $47.43 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.6 percent last week. The global benchmark crude traded at a premium of $2.45 to August WTI.
U.S. drillers increased the rig count by six to 747 last week, the highest level since April 2015, according to Baker Hughes. American crude production has expanded to 9.33 million barrels a day, Energy Information Administration data show.
Libya’s oil production has risen to about 900,000 barrels a day after some fields restarted and the country’s biggest deposit, Sharara, increased output, according to a person with knowledge of the matter. Libya, exempt from the OPEC deal, plans to boost output to the highest since 2013 by the end of July.
- Demand will rise during the third quarter and supply cuts need more time to have an impact on the market, United Arab Emirates Energy Minister Suhail Mohammed Al Mazrouei said in Dubai. Saudi Energy Minister Khalid Al-Falih made a similar comment in Saudi newspaper Asharq al-Awsat.
- OPEC will need to maintain its current supply quota through 2018 to prevent an increase in inventories, unless rig counts decline substantially, Morgan Stanley analysts wrote in a report.
- China’s Ministry of Commerce granted a second batch of crude import quotas totaling 15.77 million tons for processing at independent refineries, two officials from companies that received notification said.
- Kazakh Energy Minister Kanat Bozumbayev said his country agreed to the extension of the production-cut agreement because it’s counting on the deal to boost prices.
- There’s significant downside to U.S. oil-supply projections for 2017 and next year if prices remain at about $45 a barrel, according to industry consultants FGE.