New York - Oil dropped to the lowest in more than a week on signs US output is rebounding, undermining OPEC’s efforts to clear a global glut.
Futures fell as much as 1 percent in New York. Crude output at major US shale plays is forecast to climb to 5.2 million barrels a day in May, the highest since 2015, according to the Energy Information Administration’s monthly Drilling Productivity report. Explorers in the nation have added rigs for the past 13 weeks, data from Baker Hughes Inc. show.
Oil had rallied above $53 a barrel after some producers voiced support for prolonging a six-month supply-cut deal by the Organisation of Petroleum Exporting Countries and its allies. OPEC ministers are scheduled to gather in Vienna on May 25 to discuss whether to extend the curbs. While US shale output could come “roaring back,” supplies will start falling significantly as the curbs by OPEC and its partners continue, Citigroup Inc. said in a report.
"We should have a month of headline-driven trading in the run-up to the May 25 meeting," Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said in a phone interview.
"The chatter of an OPEC extension has been priced in, and without signs of an agreement I don’t see us moving higher. The reality of rising US output and massive inventories are weighing on prices."
West Texas Intermediate for May delivery fell 25 cents to $52.40 a barrel at 9:16 a.m. on the New York Mercantile Exchange. Prices touched $52.14, the lowest since April 7. Total volume traded was in line with the 100-day average.
Brent for June settlement slipped 26 cents to $55.10 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.20 premium to WTI for the same month.
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US crude inventories probably shrank by 1.7 million barrels last week, according to a Bloomberg survey before an EIA report Wednesday. Stockpiles expanded to 535.5 million barrels at the end of March, the highest in weekly data compiled by Bloomberg since 1982.
Oil producers are showing “very good” compliance with pledged production cuts, Saudi Energy Minister Khalid Al-Falih said Monday in Riyadh. While global supplies are rising because of refinery maintenance, the market is rebalancing, he said.
Citigroup said OPEC output cuts will be able to offset the response of US producers to higher prices. Goldman Sachs Group Inc. has called for the market to be patient. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, fell by 570,000 barrels last week, according to a Bloomberg survey.