Crude price dips

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

Brent crude futures, LCOc1 the international benchmark for oil prices, were at $52.64 per barrel at 0639 GMT, down 8 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $48.47 a barrel, down 4 cents, or 0.1 percent.

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

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

“U.S. oil production is forecast to grow by almost 1 million barrels per day in 2018 and by 850,000 barrels per day from May through year-end,” Barclays bank said on Monday.

But there are indicators that U.S. 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 to Aug. 18, 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, U.S. 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, investment analyst at Australia’s Rivkin Securities.

“The trajectory of crude inventories is clearly down and it will be surprising if the market will be able to ignore continued drawdowns,” he added.

Outside the United States, an outage of the Sharara oilfield in Libya might dampen flows in the short-term, traders said.

Although there was a strong support to prevent prices falling, analysts said there was little to drive oil higher.

“While the bearish sentiment has finally turned, investor positioning does not look stretched to the long side either, suggesting no strong conviction in oil markets currently,” U.S. bank Citi said in a note to clients.

Source: Reuters