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Oil extends decline as US producers boost drilling amid glut

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Oil extended declines after US producers increased drilling as the market contends with an overhang of crude inventories at the highest seasonal level in at least three decades.

[HONG KONG] Oil extended declines after US producers increased drilling as the market contends with an overhang of crude inventories at the highest seasonal level in at least three decades.

Futures lost as much as 0.7 per cent in New York after slipping 0.2 per cent Friday. Rigs targeting crude rose for a seventh consecutive week to the highest level since February, Baker Hughes Inc said on its website. 

Output from Organization of Petroleum Exporting Countries (Opec) member Libya has expanded to 560,000 barrels a day, according to an official at National Oil Corp.

This compares with a reported production rate of 540,000 a barrels a day last week.

Oil has fluctuated near US$50 a barrel amid speculation over the ability of Opec to implement an agreement to reduce supply. An Opec committee will meet later this month to try and resolve differences over how much individual members should pump and Libya is among countries exempt from the output cut.

"Oil looks vulnerable to the downside and a slide under US$50 a barrel is quite likely," said Michael McCarthy, chief market strategist in Sydney at CMC Markets.

"There is some support for West Texas around US$48, but if we breach that level, we're looking for a pullback toward US$45."

West Texas Intermediate for November delivery fell as much as 36 US cents to US$49.99 a barrel on the New York Mercantile Exchange and was at US$50.18 at 11.55am in Hong Kong.

The contract dropped 9 US cents to US$50.35 on Friday. Total volume traded was about 32 per cent below the 100-day average.

Brent for December settlement was 7 US cents lower at US$51.88 a barrel on the London-based ICE Futures Europe exchange. The contract lost 0.2 per cent to US$51.95 on Friday. The global benchmark crude traded at a premium of US$1.29 to WTI for December.

US producers added four rigs to 432 last week, Baker Hughes said Friday. Explorers have now added more than a hundred rigs since a steady expansion began in June. The nation's crude inventories expanded to 474 million barrels through Oct 7, according to data from the Energy Information Administration.

BLOOMBERG