Oil slips due to growth of drilling activity in U.S.

    597

    Crude prices fell in the world market due to a 19-week consecutive increase in the number of drilling rigs in the U.S. This process undermines the efforts of OPEC and 11 non-cartel states that agreed to cut output of “black gold” and achieve a balance in the global market.

    Brent crude, the global oil benchmark, fell 0.25 percent to $52.38 per barrel, WTI (West Texas Intermediate) were trading down 0.28 percent at $49.66 per barrel.

    Oil prices were increasing on Friday, because the statistics of the American oil and gas service company Baker Hughes confirmed the damping of the rate of growth in the number of functioning drilling rigs in the U.S. During the working week that ended on May 26, their number increased by seven, or by 0.77 percent, to 908 units. Thus, the rate of increase in the number of installations has been declining for several weeks in a row.

    Experts say that a potential near-term catalyst for further gains could be U.S. inventory data to be released on Thursday.

    Meanwhile, Investment bank RBC said that the production cut extension should result in a price floor slightly above $50 a barrel. RBC’s prediction is for WTI “to move into the mid-to-high-$60 per barrel range as global balances tighten” in the second half of 2017.

    The Organization of Petroleum Exporting Countries and 11 other oil-producing nations, including Russia, first agreed to cut production by 1.8 million barrels per day last December in an effort to boost flagging prices.

    Last week, OPEC and non-OPEC members agreed to extend a cut in oil supplies until the end of the first quarter of 2018 to reduce a glut of supply.

    Investors are disappointed at major producers’ decision to maintain their production cuts at the same level, rather than deepening them. Saudi Arabia’s Energy Minister, Khalid al-Falih, said ministers did not see a need to reduce oil output further.

    Reliable data on world oil reserves are difficult to obtain. However, information on raw material reserves in the U.S., Europe and parts of Asia indicates that in recent weeks, commodity oil reserves have declined. However, this decline occurs against the backdrop of record levels of excess “black gold”.