Oil slips as US output offsets Opec-led cuts

LONDON: Oil prices slipped on Tuesday as rising US drilling activity undermined efforts by Opec and other producers to cut output in a move to prop up the market. Brent crude oil was down 20 cents a barrel at $55.03 by 0900 GMT. US light crude was down 30 cents a barrel at $52.33. Both benchmarks have traded within fairly narrow ranges over the last two months, since the Organization of the Petroleum Exporting Countries agreed to cut output by almost 1.8 barrel per day (bpd) in an attempt to clear a global glut. After an initial price rise on hopes that markets would rebalance quickly, Brent and US crude futures have both been held back by evidence of higher US oil drilling and forecasts of a rebound in shale production. Support from Opec cuts and pressure from shale are still dominating the global oil market, keeping Brent close to $55 a barrel and US crude not far from $52.50. “Opec adherence to production targets has been strong,” said US investment bank Jefferies, but added that US drilling “activity levels are already picking up”. As a result, Jefferies said it was “not inclined to change our Brent price forecast — $57.75 per barrel in 2017, $71.75 per barrel in 2018”. Following months of increased drilling, US oil production has risen by 6.3 per cent since July last year to almost 9 million bpd, according to data from the US Energy Information Administration. Goldman Sachs estimates that year-on-year US oil “production will rise by 290,000 bpd in 2017” if a backlog on rigs that are still to become operational is accounted for. The differing outlook between global oil markets and the US market has focused attention on the spread between Brent and US crude oil futures, also known as West Texas Intermediate or WTI. — Reuters