Oil set for first monthly drop since August on US stock fears

Bloomberg

Oil is poised for its first monthly decline in half a year as January’s rally fades on growing fears over booming US shale supply.
Futures in New York were little changed, putting them on course for a 2.8 percent drop in February. An industry report was said to show US oil inventories rose last week, which would be the fourth expansion in five weeks if confirmed in government data. The head of OPEC plans to dine with shale producers in Houston next week at a time when America is pumping at record levels and threatening the group’s efforts to curb a global glut.
After the best start to the year in more than a decade, oil has had a tumultuous month. Prices tumbled early in February following a global asset rout, only to recoup some losses as equities rebounded.
While output curbs by the Organization of Petroleum Exporting Countries, a supply disruption in Libya and turmoil in Venezuela have helped underpin prices, expanding US shale production continues to haunt the market.
“Basically what investors are weighing is US shale versus OPEC right now,” Tamas Varga, analyst at PVM Oil Associates Ltd said by phone. “It’s not clear yet who will be the winner as US oil production keeps going higher despite the OPEC cuts.”
West Texas Intermediate for April delivery fell 3 cents to $62.98 a barrel on the New York Mercantile Exchange as of 11:09 a.m. in London, on course for the first monthly decline since August.
The drop this month comes
after prices rallied 37 percent in the five months through to the end of January. Total volume traded was about 21 percent below the 100-day average.
Brent for April settlement dropped 4 cents to $66.59 a barrel on the London-based ICE Futures Europe Exchange. The contract lost 1.3 percent, or 87 cents. The more-active May contract gained 7 cents to $66.59. The global benchmark crude traded at a $3.70 premium to April WTI.
The American Petroleum Institute was said to report US oil stockpiles rose by 933,000 barrels last week. Government data on Wednesday is forecast to show inventories rose by 3 million barrels, according to a Bloomberg survey.
US crude output is forecast to rise to a record level in February, stoking fears that shale producers may derail OPEC’s strategy of reducing output to clear a global glut.
The producer group’s Secre-
tary General Mohammad Barkindo said he will meet with US shale company executives for dinner on Monday in Houston, the second time he has met with some of the cartel’s top rivals.