Singapore: US oil ticked lower on Monday, falling for the first time in three sessions as prospects of rising US production weighed on the market.
US energy companies last week added the most rigs drilling for new production in almost four years. Drillers added 29 rigs in the week to 20 January, bringing the total count up to 551, the most since November 2015, energy services firm Baker Hughes said on Friday.
US oil production has risen more than 6% since mid-2016, although it remains 7% below a historic high in 2015. It is back to levels of late 2014, when strong US crude output contributed to a crash in oil prices.
US West Texas Intermediate (WTI) crude futures was down 7 cents to $53.15 a barrel by 13.18 hours IST.
Brent crude, the international benchmark for oil prices, was little changed. It was trading at $55.48 per barrel— down 1 cent from its previous close.
Both Brent and WTI had traded higher earlier in the session on the back of output cuts by Opec and other producers. Production cuts by oil producers and a weaker dollar prevented the market from dropping further.
Opec and non-Opec countries have made a strong start to lowering their oil output under the first such pact in more than a decade, energy ministers said on Sunday as producers look to reduce oversupply and support prices.
Ministers said 1.5 million of almost 1.8 million barrels per day (bpd) had already been taken out of the market.
“Oil is trading in a range,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.
“In the medium term it is going to be tough for oil to break out. The more oil goes up, the more these shale drillers are going to hedge by the futures.”
Hedge funds rushed to place bullish wagers on US crude oil last week, data showed on Friday.
China, which saw its crude oil imports climb to an all-time high, also exported record volumes of diesel in December, indicating an over supplied global market.
The country’s December diesel exports surged 81.4% from the same month a year earlier to 1.78 million tonnes, customs data showed on Friday.
The US dollar fell against the euro and yen on Tuesday after a drop in oil prices suggested US inflation would stay low and prevent the Federal Reserve from hiking interest rates at a steady pace this year. Risk aversion also boosted the euro and yen.
A weaker dollar makes greenback-priced commodities cheaper for importer holding other currencies. Reuters