Oil traded slightly lower early on Monday, as signals that the U.S. crude oil output is continuously recovering mostly outweighed signs that OPEC is largely sticking to its supply-cut deal.
As of 10:00 AM (EST) on Monday, WTI Crude was down 0.75 percent at US$52.77, while Brent Crude was trading down 0.65 percent at US$55.16.
On Friday, the weekly report by oilfield services provider Baker Hughes showed that the number of active oil and gas rigs in the United States increased by 18 for a total of 712 active rigs, which was 93 rigs above the rig count a year ago. Most of last week’s gains were oil rig gains, which were up 15, from 551 the previous week to 566 last week. As of Friday, the number of active oil rigs in the United States was 68 more than the same week last year. Drillers are still adding rigs to the Permian basin at record paces. After a 10-rig gain last week alone, the Permian now has 291 oil and gas rigs—109 rigs more than the same week last year.
The rising activity across the U.S. sent oil prices lower on Friday and early on Monday prices were still struggling to find a firm direction.Related: Fundamentals Be Damned – Oil Price Correction Likely
According to consultancy Petro-Logistics, which tracks OPEC supply, the cartel’s oil output would drop by 900,000 bpd in January. OPEC has pledged to cut total production by 1.2 million bpd over the first half of this year, and is being joined by non-OPEC producers that have promised to cut another 558,000 bpd.
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“OPEC supply is on track to decrease by 900,000 bpd in January, suggesting a high level of compliance thus far into the production curtailment agreement,” Reuters quoted Petro-Logistics CEO Daniel Gerber as saying in an e-mail.
Other analysts were not so positive about the level of compliance, and Tamas Varga, analyst with PVM Oil Associates in London, told Reuters today that Petro-Logistics’ estimate was “not very encouraging” since it suggests that OPEC has achieved just 75 percent of its supply-cut target.