Oil prices suffered a setback yesterday as a rising U.S. rig count pointed to further increases in the country’s output, underlining one of only few factors holding back crude markets in an otherwise bullish environment.
On the strength of this Brent crude oil futures dropped at $73.89 per barrel down 17 cents, or 0.2 per cent, from their last close, while U.S. West Texas Intermediate (WTI) crude futures were down 21 cents, or 0.3 per cent, at $68.19 a barrel.
U.S. drillers added five oil rigs drilling for new production in the week ending April 20, bringing the total count to 820, the highest since March, 2015, according to General Electric’s Baker Hughes Energy Services Firm. The rising rig count points to further increases in U.S. crude production, which has already climbed by a quarter since mid-2016 to a record 10.54 million barrels per day (bpd).
Only Russia currently produces more, at almost 11 million bpd. Despite the dips in crude oil prices yesterday overall markets remain well supported by strong demand, especially in Asia, and Brent prices are up by 20 per cent from their 2018 lows in February.
Providing further support have been supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) introduced in 2017 with the aim of propping up prices.
“Added price pressure comes from U.S. sanctions against the key oil exporting nations of Venezuela, Russia and Iran,” said J.P. Morgan Asset Management Global Market Strategist, Kerry Craig, referring to action the U.S. government has already taken on Russian companies and individuals, as well as on potential new measures against struggling Venezuela and especially OPEC-member Iran.
The United States has until May 12 to decide whether it would leave the Iran nuclear deal and instead impose new sanctions against Tehran, including potentially on its oil exports, which would further tighten global supplies. Meanwhile, the generally elevated oil prices have sparked a spat between U.S. President Donald Trump and producer cartel OPEC.
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