Oil drops on fears of more U.S. drilling after climate deal withdrawal

Oil drops on fears of more U.S. drilling after climate deal withdrawal

While U.S. government data released on Thursday showed that crude inventories fell twice as much as forecast last week, rising exports and production suggest the glut is lingering.

For most of the past seven months, crude has largely traded between $55 and $45, and probably will drift down toward the bottom end before rebounding, according to O'Grady.

Last December, Russia and 10 other non-OPEC nations agreed to join OPEC's output cuts for the first time in 15 years.

Oil prices dropped almost 1 percent in early Asian trade on Friday, dragged down by ongoing concerns over a global glut in crude supply despite a bigger-than-expected draw in USA crude inventories. Economists, however, say that the climate deal would likely help create about as many jobs in renewable energy as it might cost in polluting industries.

A day after the American Petroleum Institute played the fairy godmother to oil bulls by reporting a huge draw in USA crude inventories, the EIA reinforced the mood by confirming a significant build in inventories.

The group, however, last week discussed cutting output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high and continue to weigh on prices, sources said.

In March, according to the monthly data, daily oil production in Texas barely registered an increase, edging up 0.1 percent to 3.3 million barrels.

Production cuts by OPEC and its partners are taking longer than expected to eliminate the surplus as USA shale drillers boost production with surprising speed.

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"There are signs that the 1.8-million-barrel cut is not really what the market is feeling because of rising production in the US, Libya, Nigeria and even the North Sea", said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

Sechin, a close ally of President Vladimir Putin, expects shale oil output to increase by about 1.5 MMbpd in 2018, close to the entire cut targeted by the Organization of Petroleum Exporting Countries and its allies including Russian Federation.

Oilfield services firm Baker Hughes (NYSE:BHI) on Friday reported its weekly count of oil rigs rose by 11 to a total 733.

Libya's crude oil production rose above a three-year high in May 2017.

Traders said that prices had received support from a tightening physical crude market.

He questioned the efficiency of the output cuts, saying oil producers were losing market share to US firms, which are not part of the deal.

The increase in US drilling activity and shale production has mostly offset efforts by OPEC and other producers to cut output in a move to prop up the market.

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