Overnight, crude settled lower on Monday, despite reports that OPEC could extend its deal to cut production with non-members beyond June, while investors continued to fret about the growing levels of US oil production and inventories.
Futures dropped 1.2 per cent in NY.
The new lows come on the back of Friday’s oil rig data from Baker Hughes, which said USA drillers added 14 rigs for a total of 631 last week, the most since September 2015. Saudi Arabian Energy Minister Khalid Al-Falih said on March 16 that the kingdom may extend its cuts if supplies stay above the five-year average. Saudi Arabia led OPEC made a decision to cut production by 1.2 million barrels per day and the Russian-led non-OPEC agreed to reduce production by 0.578 million barrels per day.
Oil futures have retreated in the past two weeks as a supply overhang driven by rising production from the United States overshadows a deal by OPEC and other producers to reduce output. Declining production in the Midwest, expansions in pipeline capacity, and more attractive imports due to narrowing crude oil price spreads all contributed to reducing movements of crude by rail. While Brent Crude for May is trading at $51.78 a barrel on the London-based ICE Futures Europe exchange. Central time. The more-actively traded May contract dropped as much as 1.7 percent.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April last traded up $0.18, or 0.37%, at $48.83 a barrel in the Globex electronic session. Recall that oil transported from OPEC countries is generally imported via the U.S. Gulf Coast. They have added 106 oil-rig count this year. By comparison, Russian Federation and Saudi Arabia produced 11.48 million and 9.98 million barrels a day in February, respectively.
U.S. drillers added oil rigs for a ninth week in a row, extending a recovery that is expected to boost shale production by the most in six-months in April.
Analysts expect US production to continue to increase. Global oil supplies rose by 260,000 barrels a day last month, bringing the total to 96.52 million barrels a day.
“We think it is very unlikely that Russian Federation will actively take part in any extension of the production cuts that goes beyond paying lip service to the agreement”, Commerzbank said in a note, adding that it would be premature for investors to “pin their hopes” on an extension.