Oil slides to lowest in a month as U.S. drillers boost output
Oil dropped to the lowest level in more than a month amid surging U.S. output and signs that OPEC and Russia may ease production limits. As Bloomberg writes in an article "Oil Slides to Lowest in a Month as U.S. Drillers Boost Output", futures in New York lost 3.1 percent this week, while the global benchmark traded in London ended the week 0.5 percent higher. Unprecedented U.S. production and transportation bottlenecks at the biggest American oil field are weighing on West Texas Intermediate crude. Meanwhile, Saudi Arabia and Russia are indicating they may push more supplies onto global markets.
“When you look at the production we’ve had in the U.S., it continues to ramp up and you end up having some capacity constraints with the pipelines,” said Mark Watkins, who helps oversee $151 billion at U.S. Bank Wealth Management. “Overseas, as people are wanting our cheaper oil, we’ve go to get it to port cities to ship that off and there’s not a quick fix for this.”
Saudi Arabia and Russia said last week that they are considering raising production, yet there are questions as to whether other nations will be on board with the proposal. Russia’s largest oil company, Rosneft PJSC, is testing its capacity to bring back production it cut under the OPEC-led accord, Renaissance Capital said.
The spread between front-month and second-month WTI contracts narrowed to 4 cents Friday, from 13 cents on Thursday. The gap, an indication of a tight market and strong demand known as backwardation, shrank from 38 cents at the start of February.
WTI for July settlement slid $1.23 to close at $65.81 a barrel on the New York Mercantile Exchange. Brent for August dropped 77 cents to end the session at $76.79 a barrel on the London-based ICE Futures Europe exchange. The global benchmark is at a $11.02 premium to WTI for the same month.
In the U.S., crude production jumped to another record high, according to Energy Information Administration data released on Thursday. The oil rig count in the U.S. also increased this week and activity levels in the Permian Basin of West Texas and New Mexico continue to rise, according to a Rystad Energy report Thursday.
Other oil-market news:
Gasoline futures dipped 0.8 percent to settle at $2.1434 a gallon.
Russian Energy Minister Alexander Novak was scheduled to meetwith President Vladimir Putin on Friday to discuss gasoline prices in Russia that have surged amid stronger crude prices, two people with knowledge of matter said
Money managers decreased bullish ICE Brent crude oil bets by 49,638 net-long positions to 451,996, the lowest level since September 2017, weekly ICE Futures Europe data on futures and options show.