Market Watch, 12 Sep. 2016- Crude oil prices fell in Asian trade Monday morning, after number of rigs digging for oil in the U.S. rose again last week, compounding fears that recent uptrend in oil prices is enticing more U.S. shale oil producers to turn on the taps in an already oversupplied market.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV6, -1.26% traded at $45.12 a barrel, down $0.77, or 1.7%, in the Globex electronic session. November Brent crude LCOX6, -0.98% on London’s ICE Futures exchange fell $0.73, or 1.5%, to $47.28 a barrel.
Trading in Asia was expected to be largely muted today as several regional markets including Singapore, Malaysia, Indonesia, and the Philippines are closed for a public holiday.
Oil prices fell Friday after data from industry group Baker Hughes indicated that the number of active U.S. rigs drilling for oil rose by seven to 414 last week. The count has climbed in ten of the last 11 weeks.
“Each dollar is being used far more efficiently and, as a result, $50 oil appears much more palatable,” Barclays said in a note.
At an energy conference in Singapore last week, several analysts and industry leaders put break-even cost for U.S. shale players from $40 to $60, depending on the technologies and capital base of the producers.
“Someone here had said the U.S. industry is being resilient and that has certainly been the case. Everyone expected massive bankruptcies and we have seen just the opposite actually,” said Harold Hamm, chief executive of Continental Resources, a heavyweight in the U.S. shale industry.
“What we are saying is that the industry has become very, very efficient and many of those companies are in a lot better shape today than back in 2014,” he said. Hamm is energy adviser to the U.S. Republican Party presidential nominee Donald Trump.
The latest rise in the U.S. oil rig count also strengthens the assumption that the massive 14.5 million barrels decline in U.S. crude inventory for the week ended Sep 2 was a one-off event, driven by the inclement weather in the Gulf of Mexico region, said Vivek Dhar, commodities strategist with the Commonwealth Bank of Australia.
Prices are expected to face more pressure before the meeting of the Organization of the Petroleum Exporting Countries later this month, as optimism that major oil producers will agree on a production pact has largely evaporated, with prices climbing nearly 50% compared with seven months ago without any intentional production curtailment.
“With prices going on, a deal [to freeze production] is not imminent,” said Dhar.
Nymex reformulated gasoline blendstock for October RBZ6, -0.19% — the benchmark gasoline contract — rose 14 points to $1.3625 a gallon, while October diesel traded at $1.4186, 118 points lower.
ICE gasoil for September changed hands at $408.50 a metric ton, down $10.75 from Friday’s settlement.
Source:Market Watch, 12 Sep. 2016
