Oil prices extend losses amid rising USA output

Original Sightline Institute graphic available under our free use policy

Original Sightline Institute graphic available under our free use policy

Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the US increased by 15 last week, the 12th gain in 13 weeks. International Brent Crude Oil finished Friday's session at $55.52, down $0.72 or -1.28%.

"In our view the strong rise in US shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment", said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

However, since mid-2016, USA oil production has been rising, with the International Energy Agency forecasting total US output growth of 320,000 bpd in 2017 to an average of 12.8 million bpd.

NYMEX crude for March delivery was down 27 cents at $52.90 a barrel.

Rising U.S. inventories and output are countering efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and other producers including Russian Federation to cut supplies by a nearly 1.8 million bpd during the first half of 2017 in an effort to end a global glut.

"EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day in the fourth quarter of 2016, driven by an increase in production and a significant, but seasonal, drop in consumption", the agency said. Oil-services firm Baker Hughes reported that drillers added 15 rigs in the USA, bringing the total crude oil rig count to 556, the highest since November 2015. Most of last week's gains were oil rig gains, which were up 15, from 551 the previous week to 566 last week. Market watchers will also keep a close eye on USA production and the impact it has on supply and demand.

Oil prices have remained above $50 a barrel since producers agreed on the deal in December, encouraging drillers in low-priced USA shale producing regions to ramp up activity.

Uncertainty over the outlook for U.S policy also broadly weighed on financial markets after President Donald Trump introduced immigration curbs that sparked criticism at home and overseas.

"However we expect the reductions being made by OPEC will far exceed any rise in the USA and quickly reduce the global inventory that has been built up over the past two years", it added.

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