Oil struggles to persist with bull run as US drilling rises

Bloomberg

Oil’s rally is unraveling on fears over a rise in US production after crude’s best January in more than a decade. Futures in New York are extending declines for a second session as Baker Hughes data showed American explorers last week raised the number of rigs drilling for crude to the highest in almost six months. Short-sellers betting against West Texas Intermediate oil increased their positions for a third week, according to figures from the US Commodity Futures Trading Commission.
Crude has remained above $60 a barrel this year, extending a rally driven by the extension of an output deal until the end of 2018 by the Organization of Petroleum Exporting Countries and its allies. While oil’s best start to the year since 2006 was also helped by falling US inventories and a weaker greenback, Citigroup Inc. says the market is underestimating US output growth as a bigger surge is forecast along with an increase capital spending.
“With the higher US oil rig counts and higher oil production sustaining into February, the concerns in the market seem to be valid at this point,” Barnabas Gan, an economist at Oversea-Chinese Banking Corp., said by phone from Singapore. “As these worries resurface, prices are edging lower.”
WTI for March delivery dropped as much as 83 cents to $64.62 a barrel on the New York Mercantile Exchange and traded at $64.92 at 7:53 a.m. in London. The US benchmark declined 35 cents to $65.45. Total volume traded was about 51 percent above the 100-day average.
Brent for April settlement lost as much as 89 cents to $67.69 a barrel on the London-based ICE Futures Europe exchange. Prices dropped 2.8 percent last week. The global benchmark crude traded at a premium of $3.50 to April WTI, the least since August.
US drillers last week added 6 rigs to raise the number of machines drilling for crude to 765, the highest since Aug. 11, Baker Hughes data showed.