Oil drops as USA drilling growth threatens to counter Opec cuts

OilMar13

Oil prices fell with already-bloated markets pressured by rising U.S. drilling activity and steady supplies from Organisation of the Petroleum Exporting Countries (Opec) countries despite touted production cuts.

With Baker Hughes data still a factor in trading, the price for Brent crude oil was down 1.3 percent from Friday's close to $51.09 per barrel about a half hour before the start of trading in NY.

Last week speculators cut more than 150,000 contracts betting on firmer U.S. and Brent oil prices, a record high.

Traders said trading sentiment dampened at the futures trade after oil prices dropped in global markets.

Prices also failed to strengthen after Saudi Arabia Minister Khalid al-Falih said on Thursday the cuts by the OPEC and non-OPEC producers could be extended beyond June if oil stockpiles stayed above long-term averages.

Shale oil seems to be picking up production, taking its cue from the more bearish crude oil prices despite short-term bounces, supply cuts and improved demand estimates.

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Recent reports showed that oil production from the USA shale producers would increase next month, according to the United States Energy Information Administration (EIA).

The IEA said crude stocks in the world's richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels. The supply cuts triggered positive vibes for crude oil and investors were looking forward to booking gains once the output cuts restore a sense of balance to the market.

"The EIA report predicts that net oil production will increase by 109,000 barrels a day next month".

Total crude output declined to 9.75 million barrels per day - the lowest level since February 2015. The KSA had technically only signed off on cutting production to 10.058 million barrels per day.

An historic agreement between OPEC countries and other oil producers to reduce their output won't be enough to nudge crude prices above $60 a barrel this year, according to energy lender Arab Petroleum Investment Corp.

The cartel spent two years prioritizing export volume over prices to corner the market and hit the booming American oil industry, but was forced to cut production as lower earnings led to a record budget deficit.

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