Oil dips on rising US output, but drilling activity slows

Source:Reuters-Global Times Published: 2017/8/21 18:03:40

Oil dipped on Monday, weighed down by rising US output, although a 13 percent fall in US crude inventories since March indicated a gradually tightening market.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $52.55 per barrel down 0.34 percent from their last close.

US West Texas Intermediate (WTI) crude futures CLc1 were at $48.58 a barrel, down 0.14 percent.

The moves follow a sharp 3 percent jump in prices on Friday.

Traders said the market was dampened by rising US production, which has broken through 9.5 million barrels per day (bpd), its highest since July 2015.

"US oil production is forecast to grow by almost 1 million barrels per day by 2018 and by 850,000 bpd from May through year-end," Barclays bank said on Monday.

But there are indicators that US output may soon slow as energy firms cut rigs drilling for new oil for a second week in three, the Baker Hughes energy services firm reported on Friday. Drillers cut five oil rigs in the week leading up to Friday, bringing the total count down to 763, Baker Hughes said.

"The rig count suffered its biggest fall since January, adding to signs that the market is tightening," ANZ bank said on Monday.

Also, US commercial crude inventories have fallen by almost 13 percent from their March peaks to 466.5 million barrels.

Analysts said that falling crude inventories, despite rising output, indicate the market is already tightening.

"The rebalance of the oil market is well under way according to inventory data, however, the market is heavily focused on the fact that shale supply continues to increase," said William O'Loughlin, an investment analyst at Australia's Rivkin Securities.

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