Oil prices down nearly 1 per cent
By Devika Krishna Kumar
NEW YORK, Feb 24 (Reuters) – Oil prices fell about 1 percent on Friday as worries about rising U.S. supplies outweighed OPEC pledges to boost compliance with output curbs.
But crude prices were on track for a weekly rise as traders have begun to pull out barrels from pricey storage, with physical markets showing signs of tightening.
U.S. drillers added oil rigs for a sixth consecutive week, extending a nine-month recovery, energy services firm Baker Hughes Inc said.
Prices were also pressured by book squaring ahead of the weekend and upcoming Feb. 28 expirations in Brent futures for April delivery, heating oil for March delivery, and March RBOB gasoline, analysts and traders said.
Brent crude oil settled down 59 cents, or 1.04 per cent, at $55.99 a barrel, while U.S. West Texas Intermediate ended the session 46 cents lower at $53.99 a barrel.
However, both benchmarks notched a weekly gain of about 1.1 per cent.
“The oil market remains focused on the global rebalancing act, with attention centered on OPEC compliance and U.S. production growth,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
“The push-pull situation between stock draws relative to price-elastic U.S. shale remains paramount to the rebalance.”
Prices tumbled over the last two sessions after government data showed U.S. crude inventories rose for a seventh straight week. But they have been supported within a tight $4 to $5 range since November, when the Organization of the Petroleum Exporting Countries (OPEC) and other producers agreed to cut production.
OPEC’s record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets.
The International Energy Agency put OPEC’s average compliance at a record 90 per cent in January, and based on a Reuters average of production surveys, it stands at 88 per cent.
However, exports from the United States, which is not part of the deal, hit a record high of 1.2 million barrels per day (b/d) last week and production rose to above 9 million b/d, the highest since April, the U.S. Energy Administration Agency said.
The surge in U.S. exports is opportunistic, said Sandy Fielden, director of oil and products research at Morningstar.
Traders were draining the priciest U.S. storage tanks and selling oil held in tankers due to rising prices of oil for near-term delivery.
Analysts at LBBW cut their year-end Brent price forecast by $5 to $55 a barrel, citing U.S. production growth and technical factors.
“Most market participants realise that the good news from OPEC seems to be priced in,” said LBBW oil analyst Frank Klumpp.
(Additional reporting by Karolin Schaps in London, Aaron Sheldrick in Tokyo; Editing by David Gregorio and Meredith Mazzilli)