Oil Heads for Fifth Weekly Drop as Supply Climbs

(Bloomberg) 

Oil is heading for a fifth weekly decline after sinking into a bear market amid concerns rising supply from the U.S. to Libya would offset production cuts from OPEC and its allies.

Front-month futures gained 10 cents in New York, yet were down 4.2 percent for the week. U.S. crude production has extended gains above 9.3 million barrels a day, Libya is pumping the most in four years and oil stored in tankers rose to a 2017 high earlier this month. A committee tasked with monitoring compliance to the OPEC-led deal gave only cursory attention to the possibility of deepening the existing curbs, according to delegates familiar with the meeting this week.

Oil in New York and London tumbled into a bear market this week on concerns that expanding global supply will counter reductions from the Organization of Petroleum Exporting Countries and its partners including Russia. Rigs drilling for oil in the U.S. are at their highest since April 2015, according to data from Baker Hughes Inc. The latest weekly data will be released at 1 p.m. New York time.

“The futures curve may have reached a point when it no longer makes sense for U.S. drillers to add rigs,” said  Bjarne Schieldrop, chief analyst, commodities at SEB Markets. “The revival in Libya oil production, the fact that OPEC and non OPEC are relatively quiet when it comes to implementing deeper cuts have been ammunition for the bears.”

West Texas Intermediate for August delivery was at $42.84 a barrel on the New York Mercantile Exchange at 8:23 a.m. local time. Total volume traded was about 31 percent below the 100-day average. Prices rose 21 cents to $42.74 on Thursday after falling 4.9 percent the previous three sessions.

See also: OPEC Has Few Escape Routes From Another Bear Market in Oil

Brent for August settlement was at $45.32 a barrel on the London-based ICE Futures Europe exchange, up 10 cents. The contract gained 40 cents to $45.22 on Thursday. Prices are down 4.3 percent this week. The global benchmark crude traded at a premium of $2.47 to WTI.

U.S. oil production rose by 20,000 barrels a day last week to 9.35 million, the Energy Information Administration reported Wednesday. While crude stockpiles slid by 2.45 million barrels to 509.1 million, a steeper decline than forecast in a Bloomberg survey, inventories remain about  100 million barrels above the five-year average.

Oil-market news:

A Saudi-led bloc has presented steep demands to end the Qatar crisis, including cutting back diplomatic ties with Iran, according to a Gulf official. Abu Dhabi oil buyers have gotten approval to co-load Qatar crude, lifting one of the shipping restrictions imposed earlier this month, according to people with knowledge of the matter. Shipping and energy operations in the Gulf of Mexico were getting back to normal after Tropical Storm Cindy weakened, with Houston and Galveston-Texas City ship pilots resuming operations.