Oil Falls to Near $57 on OPEC-Cuts Review, Increase in U.S. Rigs

Oil slipped to around $57 a barrel as U.S. drilling expanded and OPEC nations Kuwait and the United Arab Emirates signaled they can phase out production cuts if the market improves.

Futures fell 0.3% in New York after climbing 2.5 percent in the previous two sessions. Drillers boosted the rig count by two to 751, a three-month high, according to Baker Hughes data on Friday. OPEC-led output curbs may end earlier than scheduled if the market re-balances by June, Kuwait’s then-oil minister said Sunday.

Oil is heading for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies including Russia extend supply cuts through the end of 2018. The extension includes an agreement to review the cuts in June, raising questions of how OPEC will eventually phase out the reductions.  Shale explorers have signaled they’re gearing up for a drilling surge next year as hedging rose for an eighth week to a record.

“If inventories fall a lot now, then the chance increases of OPEC phasing out cuts earlier than they have recently said,” according to Jens Pedersen, senior analyst at Danske Bank A/S. “The market is figuring out which stance to take on this. That said, it’s still a long way until the June review meeting.”

West Texas Intermediate for January delivery was at $57.19 a barrel on the New York Mercantile Exchange, down 17 cents, at 12:16 p.m. in London. Total volume traded was about 8 percent below the 100-day average. Prices rose 67 cents to $57.36 on Friday, trimming the weekly loss to 1.7 percent.

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Brent for February settlement fell three cents to $63.37 a barrel on the London-based ICE Futures Europe exchange. Prices slid 0.5 percent last week. The global benchmark traded at a premium of $6.07 to February WTI.

Russia is keen to end output cuts as early as possible,  Issam Almarzooq, then Kuwait’s oil minister, told Bloomberg in Kuwait City on Sunday. He was replaced on Monday by Bakheet Al-Rashidi, who led Kuwait’s international refining unit. OPEC will study an exit strategy from the global accord at its next meeting in June, and prices should remain near current levels in 2018, Almarzooq said.

Oil-market news:

While oil product inventories are rising, the small buildup will be offset by a decline in crude stockpiles, U.A.E. Energy Minister Suhail Al Mazrouei said at a conference in Kuwait. OPEC and its allies can draft a strategy in June to end the output cuts if the market is no longer oversupplied by then, he said. Goldman Sachs said Lower-48 U.S. crude oil production will grow by 280,000 barrels a day in the fourth quarter, compared with the previous quarter. Trafigura Group Ltd.’s full-year profit fell 9 percent to the lowest in seven years as a record performance by its metals and minerals business failed to offset weaker margins in oil trading.