While oil is rebounding from its biggest weekly decline in two years, a surge in U.S. shale still looms over the market.
Futures in New York were up 1.8 per cent after tumbling 9.6 per cent last week, advancing in tandem with a rebound in global equities.
“Essentially what we see today is a reversal of Friday’s sell-off,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, told Bloomberg News. “The overshooting of prices in January has triggered a stronger supply response from U.S. frackers.”
OPEC boosted estimates for rival supplies for a third month in a row as prices encourage U.S. drillers, who have raised the number of oil rigs to the highest since April 2015. Still, OPEC’s president said U.S. shale won’t derail the group’s plan to clear a chronic surplus.
Last week’s tumble reversed the year’s gains in crude, after a rout in equities spread to commodities and the U.S. continues to ramp up output. Meanwhile, a weaker dollar that had driven oil’s advance in January has been rebounding this month, cutting market support.
American drillers remain the biggest challenge to the Organization of Petroleum Exporting Countries and its allies as they curtail supply to prop up prices.
WTI for March delivery added US$1.07 to US$60.27 a barrel on the New York Mercantile Exchange at 1:40 p.m. in London, England. The contract slid US$6.25 last week to close at US$59.20, the lowest level since December 22. Total volume traded was about 30 per cent above the 100-day average.
Brent for April settlement was at US$63.71 a barrel on the London-based ICE Futures Europe exchange, up US92 cents, and traded at a US$3.66 premium to WTI for the same month.
The U.S. oil rig count rose by 26, the most in a year, to 791 last week, Baker Hughes data showed on Friday. American weekly crude output topped 10 million barrels a day for the first time on record, and the government forecasts it will skyrocket to 11 million later this year. The U.S. is now a producer of the caliber of Saudi Arabia and Russia.
“The market will likely be reluctant to rebound too much as the sharp rise in the U.S. oil rig count on Friday has spurred some concerns over whether we will see a rapid increase in U.S. output,” said Jens Naervig Pedersen, an analyst at Danske Bank A/S in Copenhagen.
(Bloomberg)
