Oil resumes decline toward US$40 as US drilling gains amid glut

[NEW YORK] Oil resumed its decline toward US$40 a barrel as US producers increased drilling for a fifth week amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.

Futures slid as much as 0.9 per cent in New York after rising 1.1 per cent on Friday as a weakening dollar bolstered investor appetite for commodities. Drillers boosted the number of rigs by 3 for the longest run of gains since August, according to a data from Baker Hughes Inc.

Libya has reopened four oil export ports, according to a statement from the Petroleum Facilities Guard.

Oil capped the biggest monthly decline in a year in July as the price recovery falters after almost doubling from a 12-year low in February. Producers including BP Plc, Royal Dutch Shell Plc and Total SA reported sharp declines in second-quarter earnings as lower energy prices take a toll.

"There is a clear downward momentum to the market at the moment," said Michael McCarthy, a chief strategist at CMC Markets in Sydney.

"There are concerns about the oversupply situation continuing. Clearly US$40 a barrel is a key point for West Texas and I'd expect to see support there given the bounces we've seen previously at that level."

West Texas Intermediate for September delivery lost as much as 38 cents to US$41.22 a barrel on the New York Mercantile Exchange and was at US$41.36 at 8:03 am Hong Kong time.

The contract rose 46 US cents to US$41.60 on Friday, snapping an 8.5 per cent decline over six sessions. Total volume traded was about 54 per cent below the 100-day average. Prices fell 14 per cent in July.

Brent for October settlement dropped as much as 42 US cents, or 1 per cent, to US$43.11 a barrel on the London-based ICE Futures Europe exchange. The September contract expired Friday after falling 24 US cents to US$42.46, capping a 14.5 per cent drop for the month.

The global benchmark was at a premium of US$1.17 to WTI for October.

BLOOMBERG