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Oil heads for biggest weekly drop since March as rig count rises
[MELBOURNE] Oil headed for the biggest weekly decline since March as a rebound in US drilling added to signs that producers will keep pumping into an oversupplied market.
Futures in New York fell for a third day, extending this week's decline to 5.2 per cent. The number of active rigs seeking oil climbed by 12 to 640, the first gain since December, according to data from Baker Hughes Inc. Iran said it recognizes the right of United Nations monitors to seek visits to sensitive sites, as diplomats work on a nuclear agreement that could restore the Opec member's crude exports.
Oil's recovery from a six-year low in March has faltered amid speculation that rising prices will spur production and prolong a surplus. Opec's output expanded last month to the highest level since August 2012 as Iraq pumps at a record pace, a Bloomberg survey showed this week.
"The rig count just confirms our view that US shale producers are more resilient than many thought a few months back," Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said by e-mail.
"US drillers still benefit from efficiency gains and falling costs." West Texas Intermediate for August delivery lost as much as 53 cents, or 0.9 per cent, to US$56.40 a barrel in electronic trading on the New York Mercantile Exchange and was at US$56.55 at 12:32 pm London time. Total volume was about 64 per cent below the 100-day average for the time of day. Prices have advanced 6.2 per cent this year.
There will be no floor trading Friday because of the Fourth of July holiday in the US, and transactions will be booked Monday for settlement purposes.
Brent for August settlement slid as much as 50 cents, or 0.8 per cent, to US$61.57 a barrel on the London-based ICE Futures Europe exchange. Futures have dropped 2.6 per cent this week. The European benchmark crude traded at a premium of US$5.04 to WTI, compared with US$3.63 on June 26.
Drillers in the US, the world's biggest oil consumer, have idled more than half the nation's rigs since December, said Baker Hughes, an oil-services company. Production remains near record levels in weekly Energy Information Administration records dating back January 1983.
Crude inventories climbed to 465.4 million barrels in the week ended June 26, data from the Energy Department's statistical arm showed. That's more than 90 million above the five-year average for this time of the year.
The US and five other global powers are seeking an agreement with Iran to curtail its nuclear program in exchange for removing sanctions that have squeezed its oil trade and economy. The negotiations, now in their 21st month, have been extended to July 7 from June 30.
There is "total commitment of all participants to end this process in the next few days," Sergei Ryabkov, Russia's deputy foreign minister and top negotiator, told reporters in Vienna late Thursday. The sanctions imposed in 2012 have curbed Iran's oil exports by about 50 per cent.
Oil in New York traded in a US$5 range in June, the narrowest in 19 months. Volume was the lowest since December and open interest, or the number of futures contracts outstanding, was the least since January. WTI, which has fluctuated at about US$60 a barrel for the past two months, will average US$59 in the third quarter and US$63 in the fourth, according to forecasts from 22 analysts compiled by Bloomberg.
The Organization of Petroleum Exporting Countries, whose 12 members supply about 40 per cent of the world's oil, pumped 32.1 million barrels a day in June, a Bloomberg survey of producers and analysts showed. That's a gain of 744,000 a day from May. Iraqi output increased to a record 4.39 million a day.
Twenty of 33 analysts and traders, or 61 per cent, were bearish on WTI in a separate Bloomberg survey through Thursday. Seven respondents were bullish while six were neutral.