London - Oil fell amid doubts that prolonged cuts by OPEC and its
allies will succeed in clearing a surplus while US output remains so resilient.
Futures lost 2.5 percent in New York and Brent sank to a three-week
low in London. While US crude stockpiles are forecast to have extended declines
for an eighth week, American drillers continue to add rigs to shale fields.
The OPEC-led deal to reduce production has helped to
“stabilize the situation on the world hydrocarbons market,” Russian President
Vladimir Putin said at a meeting in Moscow with Saudi Arabia’s Deputy Crown
Prince Mohammed bin Salman.
Oil fell after last week’s agreement to prolong supply
curbs for nine months by the Organization of Petroleum Exporting Countries
and its partners disappointed investors hoping for more.
Saudi Arabia’s Energy Minister Khalid Al-Falih said
the cuts are working and predicted global inventories will fall to the
five-year average early next year.
“There continues to be considerable scepticism about the
effectiveness of the production cuts,” Carsten Fritsch, an analyst at
Commerzbank AG in Frankfurt, said in a report. “Oil prices are still trending
towards weakness.”
West Texas Intermediate for July delivery was at $48.43 a
barrel on the New York Mercantile Exchange, down $1.24, at 1:03 p.m. in London.
Total volume traded was 38 percent above the 100-day average. The contract lost
14 cents to $49.66 on Tuesday. There was no settlement Monday because of the US
Memorial Day holiday.
Brent for July settlement, which expires Wednesday, dropped
$1.47, or 2.8 percent, to $50.37 a barrel on the London-based ICE Futures
Europe exchange. The global benchmark crude traded at a premium of $1.89 to
WTI, the narrowest in a month. The more actively traded August contract slid
$1.15 to $51.09.
US crude stockpiles probably fell by 3 million barrels last
week, according to a Bloomberg survey before an Energy Information
Administration report on Thursday. American drillers last week boosted the rig
count by 2 to 722, the highest level since April 2015, according to data from
Baker Hughes.
Oil-market news
Russia aims to keep the strategic character of its
cooperation with OPEC producers, Energy Minister Alexander Novak said at
meeting with his Saudi counterpart and OPEC Secretary-General Mohammad Barkindo
in Moscow.
Read also: Oil super majors dig out of doldrums
Goldman Sachs
equities team reduced this year’s Brent oil forecast to $55.39 a barrel from
$56.76 and WTI estimate to $52.92 from $54.80. Saudi Arabian Oil , known as
Saudi Aramco, may raise the Arab Light crude differential by 30
cents a barrel for July sales to Asian customers, according to a Bloomberg
survey.
Pumping crude from seabeds thousands of feet below water is
turning cheaper as producers streamline operations and prioritize drilling in
core wells, according to Wood Mackenzie Ltd. That means oil at $50 a barrel
could sustain some of these projects by next year.