Oil fell, extending four weeks of declines, as U.S. drillers continue adding rigs and Libya boosts output, blunting OPEC-led efforts to re-balance an oversupplied market.
Futures dropped 1.2 per cent 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 uninterrupted stretch of growth in three decades, according to data from Baker Hughes Inc. on Friday. Libya is producing the most oil in four years after a deal with Wintershall AG enabled at least two fields to resume production.
Oil plunged below US$45 a barrel last week after the U.S. Energy Information Administration said gasoline supplies surged to the highest level since mid-March at a time when summer demand should be bringing inventories down. The Organization of Petroleum Exporting Countries and its allies have sought to reduce bloated oil stockpiles to the five-year average, but increasing numbers of drilling rigs in America, as well as rising output in Libya, are putting that target in jeopardy.
"We cannot afford to have another build in crude or gasoline," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. "The market’s just dying for a reason to buy this thing, but you can’t really do that before" Wednesday’s data on stockpiles.
West Texas Intermediate for July delivery, which expires Tuesday, closed at US$44.20 a barrel on the New York Mercantile Exchange, down 54 cents. Futures have fallen 18 per cent this year.
Brent for August settlement fell 46 cents to settle at US$46.91 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.6 per cent last week. The global benchmark crude traded at a premium of US$2.48 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.
“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.”
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.