Oil dips as U.S. and Russian supplies grow, but market eyes Singapore summit

Mon 11 June 2018 07:28 GMT | 11:28 Local Time

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Oil prices fell on Monday, pulled down by rising Russian production and U.S. drilling activity creeping to its highest in more than three years.

However, many analysts were looking less at markets and more at politics as U.S. President Donald Trump and North Korean leader Kim Jong Un have both arrived in Singapore for a summit on Tuesday that may lay the groundwork for ending a nuclear stand-off between the old foes, according to Reuters. 

Back in oil markets, analysts expect surging U.S. output to start offsetting efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold production, which have been in place since early 2017 and have pushed up prices significantly in the first half of this year.

Brent crude futures LCOc1 were at $76.18 per barrel at 0639 GMT, down 28 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 18 cents, or 0.3 percent, at $65.56 a barrel.

Prices were weighed down by another rise in the number of rigs drilling for new oil production in the United States. The rig count inched up by one to its highest since March, 2015 at 862, according to energy services firm Baker Hughes on Friday.

That implies U.S. crude output, already at a record high of 10.8 million barrels per day (bpd), will climb further.

“Non-OPEC supply is expected to rise sharply in 2019 led by U.S. shale growth, along with Russia, Brazil, Canada and Kazakhstan,” U.S. bank JPMorgan said in its quarterly outlook published on Friday, adding that it was bearish on the oil price outlook going into the second-half of the year.

Going into next year, “oil fundamentals are expected to weaken in 2019 on the back of stronger-than-expected non-OPEC supply, but also the potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place,” JPMorgan said.

OPEC, together with some non-OPEC producers including Russia started withholding output in 2017 to end a global supply overhang and prop up prices.

OPEC and its partners are due to meet on June 22 at the cartel’s headquarters in Vienna, Austria, to discuss policy.

Meanwhile, Russian news agency Interfax reported on Saturday that Russia’s oil production, the world’s biggest, had risen to 11.1 million bpd in early June, up from slightly below 11 million bpd for most of May, and well above its target output of under 11 million bpd as part of the deal.

Beyond changes in the supply-side, strong demand has been supportive of oil prices.

Overseas crude purchases by top importer China remain above 9 million bpd, despite a recent drop from records.

Judging by car sales, demand will continue to grow, with China’s May sales of new automobiles standing at 2.29 million, up 9.6 percent from the same month last year, according to the China Association of Automobile Manufacturers (CAAM).

In India, Asia’s No.2 buyer, May fuel demand rose by 3.4 percent compared with the same month last year, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Monday.

News.Az

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