Oil prices fell nearly one percent, yesterday, in response to growing evidence that United States production is rising and as some investors unwound positions ahead of the Organisation of Petroleum Exporting Countries, OPEC’s first report on compliance with its deal to cut production.
Global benchmark, Brent crude futures were down 45 cents at $56.25 a barrel, while West Texas Intermediate, WTI, crude futures were down 41 cents at $53.45 a barrel.
“Bulls are liquidating ahead of the release of the monthly OPEC report due out shortly and yet another increase in US rig counts is also playing part in the weakness,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
US oil drillers have added most drilling rigs since 2012 over the past month, bringing the total count to 591 rigs, the most since October 2015, Baker Hughes said in its weekly report.
This rise in US activity comes just as some oil producers are reducing output to reverse global oversupply in a bid to prop up prices. OPEC and other producers, including Russia, agreed late last year to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017.
The group is expected to publish its first assessment of compliance with the deal, yesterday. It was learned that compliance, according to OPEC calculations, was 92 percent in January, while the International Energy Agency said the rate was 90 percent. However, Kuwait’s oil minister said that OPEC compliance was 92 percent while that of non-OPEC producers was 50 percent.