Oil rig pumpjacks operating in the Wilmington Field area, July 30, 2013 - Reuters pic NEW YORK, March 21 - Oil fell as a Libyan port is set to resume shipments and the USA drilling revival undermines the potential for Opec output curbs to rebalance the market.
The May contract of West Texas Intermediate crude oil futures, the United States benchmark of oil prices, fell 1.6% to $48.54 per barrel. The U.S. West Texas Intermediate has declined by a massive 7.25% to around $47.95 per barrel.
The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from January 1 for six months, the first reduction in eight years.
On Friday, energy services firm Baker Hughes reported U.S. drillers added oil rigs for the ninth consecutive week. It also expects the cartel to maintain its agreed six-month production quota at around 32.5m barrels per day (bpd) for the rest of the year. Early indications supported the decline in production, but a recent report from OPEC showed a rise in global crude oil inventory despite OPEC's decline in production.
Yet nearly three months into the announced cuts, oil flows to Asia, the world's biggest and fastest growing market, have risen to near record highs. "So, unless oil demand growth rebounds to record levels in 2017, oil prices could head for another substantial fall", said Leonardo Maugeri, senior fellow at the Harvard Kennedy School's Belfer Centre for Science and International Affairs.
"The reopening of the Libyan ports is the reason for today's drop and the US rig count doesn't help", Bob Yawger, director of the futures division at Mizuho Securities USA Inc in NY, said by telephone. Oil production cut by 200,000 barrels per day is planned to be achieved by end of March, Novak said.
Opec will meet 25 May in Vienna, Austria, to decide whether to extend its 1.2m bpd production cut.
"We can't do what we did in the '80s and '90s by swinging millions of barrels in response to market conditions", he said. Production peaked in mid-2015 and fell by more than 1 million barrels per day by mid-2016. Members which agreed to the production freeze and cuts were able to reduce production from 29.9 million to 29.7 million bpd.