BLBG: Oil Slips as U.S. Drilling Gains Counter OPEC Production Cuts
OPEC achieves 92% compliance with output curbs, Kuwait says
U.S. drillers boost rig count to highest since October 2015
Oil fell in New York, snapping a three-day gain on signs that OPECâ€™s production cuts will stimulate a recovery in U.S. crude production.
Futures lost as much as 1.1 percent in New York after advancing 3.2 percent over the previous three sessions. Saudi Arabia told OPEC it cut oil production by the most in eight years, while Kuwaiti Oil Minister Essam Al-Marzooq said the organization as a whole has delivered 92 percent of the output curbs it pledged. In the U.S., drillers increased the rig count to the highest since October 2015, according to Baker Hughes Inc.
Oil has fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply from Jan. 1 to ease a global glut. The market will shift into a deficit during the first half of this year and U.S. crude stockpiles will shrink amid a decline in imports as the curbs take effect, Goldman Sachs Group Inc. said last week. Yet higher crude prices have spurred drilling in the U.S., the worldâ€™s biggest oil consumer.
â€śItâ€™s a dilemma for OPEC,â€ť Spencer Welch, director of oil markets and downstream at IHS Markit, said in a Bloomberg radio interview. â€śThey want to help themselves, and by doing that theyâ€™re helping others as well. Thatâ€™s unavoidable. OPEC is saying they canâ€™t change what happens in the U.S., so yes, production will increase.â€ť
West Texas Intermediate for March delivery lost as much as 57 cents to $53.29 a barrel on the New York Mercantile Exchange, and traded at $53.57 as of 8:45 a.m. local time. Total volume traded was 5 percent below the 100-day average. The contract gained 86 cents to $53.86 on Friday. Prices averaged $52.61 last month.
Brent for April settlement fell as much as 66 cents, or 1.2 percent, to $56.04 a barrel on the London-based ICE Futures Europe exchange, after gaining 1.9 percent on Friday. The global benchmark traded at a premium of $2.24 to April WTI.
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The 11 OPEC nations bound by the accord reduced output by 1.12 million barrels a day to 29.93 million a day last month, according to a Feb. 10 report from the International Energy Agency. Global oil inventories will fall by 600,000 barrels a day during the first half of the year if the group sticks to its agreement, the agency said. OPEC itself said on Monday it lowered production by about 890,000 barrels a day in January, citing so-called secondary-source numbers.
Russia will decide in April or May whether to extend the output-cut deal with OPEC, Energy Minister Alexander Novak said, according to a report from state news service RIA Novosti.
The United Arab Emirates hopes to see more commitment to the production cuts in the coming months, especially from non-OPEC members, Energy Minister Suhail Al-Mazrouei said in Dubai.
Iraq will export 3.014 million barrels a day of crude next month, the lowest level since August, according to a loading plan obtained by Bloomberg.