Oil prices fall as relief over falling United States rig count fades

Jeannie Matthews
March 13, 2018

Brent crude futures were at $65.38 per barrel, down 11 cents, or 0.2 per cent, from their previous close.

Futures in NY were little changed after surging 3.2 percent Friday.

WTI for April delivery traded at $62.17 a barrel on the New York Mercantile Exchange, up 13 cents at 8:46 a.m.in Tokyo.

Both WTI and Brent as recently as Thursday had marked their lowest settlements since mid-February.

Unlike Middle Eastern nations such as Saudi Arabia, which wants high crude prices to boost the value of its IPO of state-run Aramco, Iran expressed its concern over steadily-rising US production by stating it wants to work with the Organization of the Petroleum Exporting Countries (OPEC) to keep prices at $60 and curtail the output.

The oil production in the United States is not the only problem.

Williams also pointed out that based on the figures, USA shale plays this year will "add enough to US production to match all the oil Venezuela now produces".

Iran wants OPEC to work to keep oil prices around $60 a barrel to contain USA shale producers, Oil Minister Bijan Zanganeh told The Wall Street Journal in a rare interview, while Saudi Arabia has played down shale's ability to upset the market and has indicated $70 for oil is acceptable.

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On Friday, Baker Hughes said the USA rig count dropped for the first time in seven weeks.

"From a fundamental standpoint, that is a material concern as the USA oil industry alone could push the global market back into a surplus, which was the reason behind the 2014-2015 bear market in oil", he said in a daily newsletter.

That has undercut some of the enthusiasm for oil, as investors weigh increased US supply against the likelihood that the Organization of the Petroleum Exporting Countries and non-OPEC producers will maintain supply cuts that have been in effect for more than a year.

On one side is Saudi Arabia, which wants oil prices at $70 a barrel or higher, and on the other is Iran, which wants them around $60.

"A falling rig count and the strong employment data may have helped support prices", said William O'Loughlin, investment analyst at Rivkin Securities. It was the first such decline in seven weeks.

"The longer the deal goes on, it's going to start falling apart", ING commodities strategist Warren Patterson tells Bloomberg.

U.S. Stocks closed mixed, with the S&P 500 and Dow Jones Industrial Average ending in the red, while the Nasdaq Composite added about 28 points. Only Russia pumps more, at almost 11 million bpd.

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