Oil fell around 1% on March 20 as investors continued to unwind bets on higher prices after record cuts last week because of concerns that growing U.S. oil output could hamper an OPEC-led production cut deal.
Benchmark Brent crude futures were down 55 cents at $51.21 a barrel (bbl) at 7:19 a.m. CT (12:19 GMT). U.S. West Texas Intermediate crude futures were trading 73 cents lower at $48.05/bbl.
"Speculative investors have thrown in the towel it seems. We've got record selling in the week ending March 14 and the bleeding has not stopped yet," said Carsten Fritsch, senior commodities analyst at Commerzbank in Frankfurt.
Oil futures have retreated in the past two weeks as a supply overhang driven by rising production from the U.S. overshadows a deal by OPEC and other producers to reduce output.
The persistent glut prompted hedge funds and other money managers to cut their net long U.S. crude futures and options positions by a record amount in the week to March 14.
On March 20, ICE data showed speculators reduced long positions on Brent by 66,683 contracts, the highest since November 2016.
This means that speculators last week cut more than 150,000 contracts betting on firmer oil prices, a record high.
Latest U.S. drilling data supported estimates for higher production, with 14 oil rigs added in the week to March 17 to 631, the most since September 2015, Baker Hughes Inc. (NYSE: BHI) said March 17.
Growing U.S. production is playing into concerns about the effectiveness of the deal to cut production by OPEC and non-OPEC members.
The prospect of higher output from Libya, which is exempt from the deal, is adding further bearish sentiment.
Libya's National Oil Corp. (NOC) said it was confident of regaining control of two key oil ports, Es Sider and Ras Lanuf, which have a combined capacity to export 600,000 bbl/d.
"Hedge selling from producers and long-liquidation from funds is a bearish cocktail," said Ole Hansen, Saxo Bank's head of commodity strategy.
An upgrade in supply estimates also led analysts at J.P. Morgan to cut their 2017 and 2018 price forecasts.
"The risks that OPEC has painted itself into a corner cannot be ignored and it may need to extend or even increase cuts, if the response from shale producers is more vigorous than we currently model," the firm said in a report.
Recommended Reading
Marathon Petroleum Sets 2024 Capex at $1.25 Billion
2024-01-30 - Marathon Petroleum Corp. eyes standalone capex at $1.25 billion in 2024, down 10% compared to $1.4 billion in 2023 as it focuses on cost reduction and margin enhancement projects.
Humble Midstream II, Quantum Capital Form Partnership for Infrastructure Projects
2024-01-30 - Humble Midstream II Partners and Quantum Capital Group’s partnership will promote a focus on energy transition infrastructure.
Hess Corp. Boosts Bakken Output, Drilling Ahead of Chevron Merger
2024-01-31 - Hess Corp. increased its drilling activity and output from the Bakken play of North Dakota during the fourth quarter, the E&P reported in its latest earnings.
The OGInterview: Petrie Partners a Big Deal Among Investment Banks
2024-02-01 - In this OGInterview, Hart Energy's Chris Mathews sat down with Petrie Partners—perhaps not the biggest or flashiest investment bank around, but after over two decades, the firm has been around the block more than most.
Some Payne, But Mostly Gain for H&P in Q4 2023
2024-01-31 - Helmerich & Payne’s revenue grew internationally and in North America but declined in the Gulf of Mexico compared to the previous quarter.