Published: Tue, March 13, 2018
Business | By Max Garcia

Oil prices fall as relief over falling U.S. rig count fades

Oil prices fall as relief over falling U.S. rig count fades

As the rig count fell, "the market is starting to think that USA shale oil production may not steadily grow, which is supporting oil prices", Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National, said by phone from Tokyo.

Additionally, U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record 6.95 million bpd, the U.S. Energy Information (EIA) said in a monthly report on Monday.

"Permian and Bakken shale basins still saw active oil rigs rising by 2 and 3 last week, respectively, and are likely to keep United States oil production on increasing trend", ING said.

While OPEC has complied with its 2017 production pledge, US flows that are gaining a bigger slice of the Asian market may cause some countries to increase supplies, which could drag down crude prices after a rally of more than 40% since June, ING says. The dollar tends to have an inverse relationship with oil prices, as a weaker greenback makes dollar-denominated commodities cheaper for holders of other currencies.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished lower on Monday on renewed concerns over rising U.S. production and tight OPEC supply. Total volume traded was about 23 percent below the 100-day average.

Brent crude futures were at US$65.38 per barrel, down 11 cents, or 0.2 per cent, from their previous close. The global benchmark traded at a $3.47 premium to May WTI.

The US economy added the biggest number of jobs in more than 1-1/2 years in February, with non-farm payrolls jumping by 313,000 jobs last month, the Labour Department said on Friday.

Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in nearly two months. "They continue to give market share away to the U.S".

It is not clear when the deal to withhold output will end, but Iranian oil minister Bijan Zanganeh said Opec could agree in June to begin easing current oil production curbs in 2019, the Wall Street Journal reported yesterday.

The pessimistic view was echoed in money managers' short-selling position.

The US consumer price index comes out Tuesday.

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