Oil prices dip on further rise in US drilling, demand slowdown

Tuesday, 20 June 2017 00:00 - - {{hitsCtrl.values.hits}}

Singapore (Reuters): Oil prices dipped on Monday, weighed down by a continuing expansion in U.S. drilling that has helped to maintain high global supplies despite an OPEC-led initiative to cut production to tighten the market.

Signs of faltering demand have also prompted weakening sentiment, dropping prices to levels comparable to when the output cuts were first announced late last year.

Brent crude futures were down 18 cents, or 0.4%, at $47.19 per barrel at 0659 GMT.

U.S. West Texas Intermediate (WTI) crude futures were down 20 cents, or 0.5%, at $44.54 per barrel.

Prices for both benchmarks are down by around 14 percent since late May, when producers led by the Organization of the Petroleum Exporting Countries (OPEC) extended their pledge to cut production by 1.8 million barrels per day (bpd) by an extra nine months until the end of the first quarter of 2018.

Traders said the main factor driving prices lower was a steady rise in U.S. production undermining the OPEC-led effort.

“The U.S. oil rig count continued to rise, up by 6 last week,” Goldman Sachs said late on Friday.

“That’s 22 weeks in a row that oil rigs have been added, a record run,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader. U.S. producers have added 431 oil rigs since a trough on May 27, 2016, Goldman said. If the rig count holds at current levels, the bank added, U.S. oil production would increase by 770,000 bpd between the fourth quarter of last year and the same quarter this year in the Permian, Eagle Ford, Bakken and Niobrara shale oil fields.

Supplies from OPEC and other countries participating in the output cuts, including top producer Russia, also remain high as some countries have not fully complied with their pledges.

There are also indicators that demand growth in Asia, the world’s biggest oil-consuming region, is stalling.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.