Oil prices down as dollar firms, OPEC compliance rate shrugged off

Oil prices
Oil prices fell in trading on Monday after reports late last week that US drillers have added the most drilling rigs since 2012. Anadarko photo.

Oil prices down, US rig count up

By Scott DiSavino

NEW YORK, Feb 13 (Reuters) – Oil prices declined on Monday by about 2 per cent, the most since mid-January, pressured by a stronger dollar and signs of rising U.S. crude output.

Investors were meanwhile underwhelmed by an OPEC report showing high compliance with last year’s production-cut deal.

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Brent futures lost $1.11, or 2 per cent, at $55.59 a barrel, while U.S. West Texas Intermediate crude fell 93 cents, or 1.7 per cent, to $52.93 per barrel.

Those were the biggest percentage declines for both contracts since Jan. 18.

“Crude fell due to the stronger dollar earlier in the session, an increase in the U.S. rig count and an increase in U.S. productivity in the shale basins,” said James Williams, president of energy consultant WTRG Economics in Arkansas.

Hopes of U.S. tax cuts to stoke corporate profits and investments lifted the dollar to a near three-week high against a basket of currencies earlier Monday, pressuring greenback-denominated oil.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, agreed late last year to cut output by almost 1.8 million barrels per day (b/d) during the first half of 2017 in a deal aimed at supporting prices and lessening a glut.

The group’s first monthly data since the deal showed that top producer Saudi Arabia made a large cut in its crude output in January, helping boost compliance with the group’s supply-reduction deal to a record high of 93 per cent.

Saudi Arabia told OPEC that it made an even bigger cut than estimated by the secondary sources, reducing January output by more than 700,000 b/d to 9.748 million b/d – lower than called for under the OPEC deal.

But high compliance had been expected and the report failed to push oil prices into positive territory.

“The good compliance rate of OPEC seems to be priced in. The U.S. rig count from Friday is weighing, the numbers support the shale comeback story,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.

U.S. shale oil production for March is expected to rise by the most in five months, government data showed on Monday, as energy companies boost drilling on the back of oil prices that are hovering over $50 a barrel.

Over the past month, U.S. oil drillers have added the most drilling rigs since 2012, bringing the total to 591 rigs, the highest since October 2015, oil services company Baker Hughes said in a weekly report.

Speculators cut net long positions on Brent last week by 10,000 contracts, weekly ICE data showed, highlighting investor concerns about rising U.S. production.

Analysts at ABN Amro are sceptical about OPEC production cuts delivering higher oil prices, and reduced Brent forecasts for the first half of this year to $50 from $55 a barrel.

(Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Jane Merriman, Marguerita Choy and Frances Kerry)