Oil prices fall on fears of higher US drilling rates after Paris Accord withdrawal

Oil prices fell in trading on Friday on investors’ concerns that President Trump’s decision to leave the Paris Climate Accord could result in more drilling and higher crude stocks. SandRidge photo.

Oil prices down 1 per cent on Friday

Oil prices fell 1 per cent in trading on Friday and were heading for a second straight week of losses as investor worried that US President Donald Trump’s decision to leave the Paris Climate Accord could result in more US oil drilling which would increase already bloated global crude stocks.

Brent crude futures dropped 61 cents to $50.02/barrel by 2:00 p.m. EDT and US WTI crude fell 62 cents to $47.74/barrel.

According to Reuters, both contracts were on track for a weekly loss of at least 4 per cent.

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Washington allies and many in the energy industry condemned the president’s decision to withdraw from the global climate change agreement which former President Obama signed in Paris in 2015.

“Trump seems to be removing any barriers he can find that would obstruct growth of crude oil or natural gas,” Stewart Glickman, energy equity analyst at CFRA in New York told Reuters.

Also on Friday, Baker Hughes reported the US rig count rose by eight to 916, more than double the number of active rigs at this time last year.  In the past 20 weeks, the rig count in the United States has increased.

According to the US Energy Information Administration, US crude production was up by nearly 500,000 barrels per day (b/d) from year-earlier levels.

The increase in production in the States is undermining OPEC’s efforts to attack the global glut.  In January, the cartel and some non-members agreed to reduce their production by 1.8 million b/d.  So far, participants’ compliance with the agreement has been high.

Last week, US production hit 9.34 million b/d, the highest since August 2015 and US output is expected to continue to rise.  The EIA predicts production to reach 10 million b/d in 2018.

Igor Sechin, head of Rosneft, Russia’s largest oil producer, says US producers could add up to 1.5 million b/d to world output in 2018.

OPEC’s supply cut agreement has had some impact on the oversupply, but investors remain edgy about the pace of the decline in inventories worldwide.

This week, the EIA reported US crude stocks fell by 6.4 million barrels, the eighth straight week where inventories declined.

“That’s relatively higher than the average draws we’ve seen, so you would have thought that crude would have fared a little better,” said CFRA’s Glickman.