Oil prices up slightly, but investors remain concerned about increased US drilling activity

Oil prices rose slightly in trading on Monday as investors remained concerned about the global oversupply of crude. Anadarko photo.

Brent oil prices down 17 per cent since beginning of 2017

Oil prices rose slightly on Monday as investors remained concerned about growing US drilling activity and higher exports from both OPEC and non-cartel producers.

Brent crude futures settled up 17 cents to $46.88/barre and US crude futures were up 0.4 per cent cents to $44.40/barrel.

Reuters reports PVM brokerage said “The market is in trouble and looks very vulnerable to lower numbers,” in a note.

The Organization of the Petroleum Exporting Countries along with some non-cartel members agreed late last year to cut their production, however, increased US, Nigerian and Libyan production has kneecapped OPEC’s plan to reduce the global oversupply of crude.

A number of key OPEC ministers will meet with Russian officials in St Petersburg, Russia on July 24 to discuss the oil market.

Bloomberg reports that on Sunday, Kuwait sources said Nigeria and Libya have been invited to the meeting and the two countries, so-far exempt from the pact, could see their production capped earlier than November when OPEC is scheduled to hold formal talks.

Libya says it is prepared for the dialogue, but added its political, economic and humanitarian situations should be taken into account in the group’s cap discussions.

Currently, Brent prices are 17 per cent below early January prices, despite impressive compliance with OPEC’s production cut pledges.

According to Reuters, BNP Paribas has joined a growing list of investment banks and analysts that have cut their crude oil price forecasts for the coming year.

“The simple truth is that OPEC and Russia have to contend with the fact is that there is output growth elsewhere diluting their efforts at reducing supply,” the bank said in a note.

“We thus have made deep cuts to our crude oil price forecasts. We now see the price of WTI averaging $49/bbl in 2017 (-$8/bbl revision) and that of Brent $51/bbl (-$9/bbl revision).”

On Friday, Baker Hughes data from its weekly drill rig count showed US energy firms added seven oil drilling rigs last week, bringing the count to 763. In 24 of the past 25 weeks, the rig count has risen and now sits at its highest level since April 2015.

US oil production has risen more than 10 per cent since mid-2016.

“This is the response of prices to news of increasing oil production in the U.S.,” Commerzbank said in a note. “The U.S. Department of Energy reported a marked rise in production that virtually reversed the previous week’s decline.”