Crude oil futures were on the backfoot early on Tuesday as reports of increased Libyan production continued to filtre through to trading floors. Oil prices had gained momentum this week on a growing sense that OPEC and non-member Russian Federation would extend their production cut, seeking to drive the market higher.
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Also pressuring oil prices, energy services firm Baker Hughes said the US rig count rose last week, making the first quarter the strongest for rig additions since mid-2011.
Elsewhere, Brent oil for June delivery on the ICE Futures Exchange in London shed 29 cents to $52.83 a barrel.
There is a high degree of uncertainty whether the OPEC production cuts will prove effective in rebalancing the crude market, especially given the impact of rising United States production.
“These changes are a signal that the rebalancing is happening faster than many in the market believe”. But due to its commitment to support oil prices, it has made a decision to temporarily suspended its plan to increase production but will continue to add capacity.
Crude oil rallied strongly last week after establishing support at $50/barrel and $47/b in Brent and WTI crude, respectively.
West Texas Intermediate for May delivery slipped 3 USA cents to US$50.57 a barrel at 10.34am on the New York Mercantile Exchange. China became the biggest buyer of US crude oil in February, surpassing Canada, at a time when OPEC is cutting back output.
Kuwait and other countries support extending the OPEC cuts, the KUNA news service reported on March 30, citing Kuwait’s Oil Minister Issam Al-Marzooq. “We have more than 100% fulfilled our obligations with OPEC”, he told reporters last week in Baghdad. Previously, Iraq planned to increase its oil output capacity to 5 million barrels per day before the end of the year, Oil Minister Jabar al-Luaibi said on Sunday.
Currently, OPEC members are producing 1.8 million barrels of oil less to tackle the rising global oil glut.
It said total crude and product inventories fell 2 million barrels relative to their five-year average, in the right direction but significantly less than the previous week’s 8.3 million barrel draw.
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“Globally, crude stocks are coming down”, said Mike Loya, the Houston-based top executive at Vitol Group BV, the world’s largest independent oil trader. Over the past week, Armed factions had blocked output at Libyan oil fields, reducing output by 252,000 barrels per day (bpd), a source at the National Oil Corporation (NOC) said last week.
