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Oil declines a third day as US, Opec output prolongs surplus
[LONDONO] Oil dropped for a third day on speculation the highest production in decades from the US and Opec's largest members will keep global markets oversupplied.
Futures lost 1.2 per cent in New York, bringing their decline over three days to 3.6 per cent. While data from Baker Hughes Inc showed drillers in the US reduced the number of active oil rigs for a 27th week, the nation's production still advanced to a three-decade high of 9.61 million barrels a day, according to the Energy Information Administration.
Oil's recovery from a six-year low has faltered as a rebound of almost 40 per cent since March spurs production. Saudi Arabia, Iraq and the United Arab Emirates are pumping at record levels as the Organization of Petroleum Exporting Countries agreed June 5 to maintain its output quota to defend market share.
"The upside remains limited and we could soon see a test lower," Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. "The focus will turn to Opec and its overproduction."
West Texas Intermediate for July delivery fell 73 cents to US$59.23 a barrel in electronic trading on the New York Mercantile Exchange at 1:15 pm London time. The contract dropped 81 cents to US$59.96 on Friday. The volume of trading was 36 per cent below the 100-day average for the time of day. Prices have gained 11 per cent this year.
Brent for July settlement, which expires Monday, declined US$1.32 to US$62.55 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of US$3.32 to WTI. The more-active August contract dropped 99 cents to US$63.65.
Opec, whose 12 members pump about 40 per cent of the world's oil, has been boosting supply as it seeks to force higher-cost producers to cut output. The group has exceeded its daily target of 30 million barrels for a year, data compiled by Bloomberg show. Saudi Arabia, Iraq and the UAE, the three largest producers in the group, pumped at a record in May, the International Energy Agency reported June 11.
Libya's output has climbed to 500,000 barrels a day, Libya News Agency reported, citing an unidentified official at National Oil Corp. The nation pumped 405,000 barrels a day in May, data compiled by Bloomberg show.
In the US, drillers seeking oil reduced the number of active rigs by seven to 635 in the week ended June 12, Baker Hughes, an oilfield-services company, said Friday. The nation's rig count has shrunk 60 per cent since December.
"The softness that we're seeing reflects the potential for supply to come back online," said Michael McCarthy, a chief strategist at CMC Markets in Sydney.
"Not only do Opec and the Saudis have the capacity to increase, but some of the shuttered production in the US has the potential to resume if there are further price rises."
Hedge funds cut bullish wagers on WTI to the lowest level in eight weeks, according to Commodity Futures Trading Commission data. Net-long positions fell by 3.7 per cent in the seven days to June 9, while longs declined to a five-month low.
Bullish bets on Brent crude dropped for a fifth week, falling by 3.4 per cent to 201,180 contracts in the week to June 9, data from ICE Futures Europe show. That's the lowest in futures and options combined since March 24.
Oil is sliding with European stocks and the region's shared currency as talks between Greece and its creditors broke down Sunday without a deal on bailout aid. The focus now shifts to a June 18 meeting of euro-area finance ministers in Luxembourg.