Oil traded Monday above $46 a barrel as predictions by Saudi Arabia and Russia that crude markets will rebalance ran up against signs that U.S. companies are drilling even more wells.
Futures added 1.3 percent in New York after sliding 3.8 percent last week. Inventories are declining and reductions will accelerate in the next three to four months, Saudi Energy Minister Khalid Al-Falih said at a briefing in Kazakhstan with his Russian counterpart, Alexander Novak. Russia is committed to doing everything it can to balance the market, Novak said. Saudi Arabia’s oil allocations to customers will be cut for July compared with the previous month, according to a person with knowledge of the matter.
Oil is trading below $50 a barrel amid speculation increased U.S. supplies will counter production curbs by the Organization of Petroleum Exporting Countries and its allies, including non-member Russia. American drillers targeting crude added rigs for the 21st straight week, the longest run of gains in three decades, according to data Friday from Baker Hughes Inc.
While comments from Saudi Arabia and Russia do add some positive sentiment to the market, “nobody really believes them at face-value anymore,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “People aren’t taking the bait.”
West Texas Intermediate for July delivery rose 59 cents to $46.42 a barrel at 10:04 a.m. on the New York Mercantile Exchange. Total volume traded was about 8 percent above the 100-day average. Prices increased 19 cents to close at $45.83 on Friday.
Brent for August settlement climbed 69 cents to $48.84 a barrel on the London-based ICE Futures Europe exchange. Prices lost 3.6 percent last week. The global benchmark crude traded at a premium of $2.10 to August WTI.
Global crude inventories will settle at their five-year historical average — OPEC’s target — before the end of the year, Al-Falih said in Astana. Still, Saudi Arabia, the group’s biggest producer, may modify its policy if output cuts don’t have the desired effect, he said.
Saudi Arabia’s oil allocations to customers will be cut for July by about 600,000 barrels a day from June, according to a person with knowledge of the matter who asked not to be identified because the information is confidential. U.S. July oil allocations are said to be reduced by 300,000 barrels a day.
Source: Bloomberg
