Oil steadies below $49 as U.S. drilling threatens longer glut

By Ben Sharples and Grant Smith on 3/13/2017

HONG KONG (Bloomberg) -- Oil steadied below $49 a barrel as U.S. drillers continued to boost activity, countering OPEC’s efforts to drain a global glut.

Futures were little changed in New York after falling 9.1% last week, the biggest weekly loss since November. Rigs targeting crude in the U.S. rose to the most since September 2015, according to Baker Hughes. In Libya, crude production dropped 11% as clashes among rival armed groups led to the closure of some of the OPEC nation’s biggest oil-export terminals.

Oil last week broke below the $50/bbl level it had held above since the OPEC and 11 other nations started trimming supply on Jan. 1. U.S. crude stockpiles have climbed to a record and production surged to the highest in more than a year, while Saudi Arabia’s Oil Minister Khalid Al-Falih said global supplies are falling slower than expected.

“Few would bet against a further selling spree,” said Stephen Brennock, an analyst at PVM Oil Associates in London. The market has been “vulnerable to a downward spiral” as speculators remain heavily invested despite “a lack of bullish catalysts.”

WTI for April delivery lost as much as $0.59 to $47.90/bbl on the NYME and traded at $48.42 in London. Total volume traded was about 15% above the 100-day average. The contract dropped $0.79 to $48.49 on Friday, capping the biggest weekly decline since November.

Rig Count

Brent for May settlement was little changed at $51.38/bbl on the London-based ICE exchange. Prices slid 8.1% last week. The Brent benchmark traded at a $2.43 premium to May WTI. U.S. drillers boosted the rig count by eight to 617 last week, according to data Friday from Baker Hughes. Companies have added 92 machines to fields this year. The nation’s crude output has climbed to 9.09 MMbpd, according to data from the EIA.

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