Oil posted its biggest weekly drop in four weeks amid questions over the effectiveness of OPEC’s deal to help rebalance the market as US production continues to grow.
Futures slid 1.5 percent in New York.
Russia’s most powerful oil boss said output curbs by OPEC and its partners probably will not succeed over the long term as US shale fills the supply shortfall.
While US government data on Thursday showed crude inventories declined last week, rising exports and production, and a jump in the oil rig count, suggest the glut will linger.
“There were some stark comments from the Rosneft CEO who said that there is a plan by producers to flood the market with oil,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “His comments certainly registered with the market. As you look back now at the deal, it looks increasingly lame.”
OPEC-led production cuts could be offset by US shale by the middle of next year, Rosneft Oil Co PJSC chief executive officer Igor Sechin said at the St Petersburg International Economic Forum.
Sechin, a close ally of Russian President Vladimir Putin, expects shale oil output to rise by about 1.5 million barrels per day next year, near the cut targeted by OPEC and its allies.
West Texas Intermediate (WTI) for July delivery on Friday fell US$0.70 to settle at US$47.66 per barrel on the New York Mercantile Exchange.
Total volume traded was about 27 percent above the 100-day average.
Prices fell 4.3 percent this week, the biggest weekly decline since the week ended May 5.
Brent for August settlement retreated US$0.68 to end the session at US$49.95 per barrel on the London-based ICE Futures Europe exchange.
Prices fell 2.2 percent this week. The global benchmark crude traded at a premium of US$2.08 to August WTI.
Oil slipped below US$50 per barrel last week as the agreement by OPEC and its allies to prolong output curbs for nine months disappointed some investors hoping for deeper cuts.
While US stockpiles have edged lower, rising US production and drilling is sowing doubt over OPEC’s efforts to trim a global glut.
While US crude inventories fell by 6.43 million barrels last week, according to Energy Information Administration data, US production rose for the 14th time in 15 weeks, by 22,000 barrels per day to 9.34 million.
The US oil rig count climbed by 11 to 733 rigs, the highest level since April 2015, according to data published on Friday by Baker Hughes Inc.
The price of oil could have dropped much more if OPEC and its partners had not extended output caps into next year, Russian Minister of Energy Alexander Novak said in an interview with Bloomberg TV at the forum.
Participants in the deal have tools to act if necessary to shorten or extend supply curbs, he said.
“The real deal is that the OPEC folks needed to take barrels off the market. Their failure to do so opens the door for, at the least, an increase in US shale production,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc in New York, said by telephone. “The market’s not buying their story anymore.”
Oil market news:
‧ US crude exports rose to average about 1 million barrels per day in April, according to Bloomberg calculations of US Census Bureau data released on Friday.
‧ Russia can “live forever” with an oil price at, or below, US$40 per barrel, Russian Minister of Economy Maxim Oreshkin said in a Bloomberg interview.
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