Seoul - Oil drifted lower, trading below $50 a barrel and extending
last week’s drop after OPEC underwhelmed investors with its production-cut
extension deal.
Futures slipped in New York. Prices closed 1.1 percent lower
last week after OPEC agreed to extend the crude output curb by nine months, the
most predictable outcome.
Saudi Arabia’s Energy Minister Khalid Al-Falih said the
strategy is working and global stockpiles will drop faster in the third
quarter. US explorers added two rigs last week to 722, the highest level
since April 2015, Baker Hughes said Friday.
“We will see oil production tightening from the third
quarter and it’s highly likely that prices will rebound,” Hong Sung Ki, a
commodities analyst at Samsung Futures Inc., said by phone in Seoul. “What’s
concerning is what happens after the nine-month agreement because there isn’t
an exit plan, while US producers will probably boost output at least until the
second half of this year.”
Oil in New York clawed back from its tumble toward $45 in
the run up to the meeting in Vienna as Saudi Arabia and Russia rallied support
for the deal. Meanwhile, US inventories dropped seven weeks in a row, though
they still remain above the five-year average and production rose to the
highest since August 2015.
West Texas Intermediate for July delivery traded at $49.67 a
barrel on the New York Mercantile Exchange, down 13 cents, at 2:03 p.m. in
Singapore. Total volume traded was about 15 percent below the 100-day
average. Prices rose 90 cents to close at $49.80 on Friday.
US Rigs
Brent for July settlement was at $52.05 a barrel on the
London-based ICE Futures Europe exchange, down 10 cents. The contract gained 69
cents, or 1.3 percent, to settle at $52.15 on Friday. The global benchmark
crude traded at a premium of $2.36 to WTI.
Read also: Oil falls to one-week low
Rigs targeting crude in the US increased for a 19th straight
week in the longest streak of gains since August 2011, according to Baker
Hughes data. While the number of working rigs has more than doubled from last
year’s low of 316, it was the smallest increase this year. Drillers in the
D-J/Niobrara Basin in Colorado led the growth last week, adding 4 for a total
of 27 oil rigs in the region.
Oil-market news
The market overreacted to OPEC’s decision to extend the
production curbs, and the global crude market is heading toward balance in the
second half of this year, Japan’s Cosmo Oil said in an emailed response to
questions.
Hedge funds’ WTI net-long positions the difference between
bets on a price rise and wagers on a drop rose 20 percent in the week ended May
23, according to the CFTC data on futures and options.