Crude prices ended weaker for a third straight day on Friday to three-month lows and the biggest cumulative decline since February of last year as the supply response to a coordinated pact to trim oil output turns the tone bearish.
On London’s Intercontinental Exchange, global benchmark Brent for May delivery dropped fell 1.57% to $51.37 a barrel, while on the New York Mercantile Exchange West Texas Intermediate crude futures slumped 1.60% to $48.49.
On the supply side, rigs drilling for oil in the U.S. rose by 8 to 617 at the end of last week, oilfield services firm Baker Hughes said on Friday, with the total rig count including natural gas now at 768, up 12 and marking the eighth straight weekly gain and the highest total since September 2015. Gas only rigs rose to 151 from 146.
Also, data from the end of last week showed sentiment was already leaning downbeat last week as bullish bets on crude futures and options were cut by hedge funds and money managers in the week ended March 7, according to the U.S. Commodity Futures Trading Commission (CFTC) on Friday, showing a drop of by 19,513 contracts to 401,659 during the period.
WTI has plunged almost 9% since Tuesday’s close, sparked in part by comments from Saudi sources who reportedly told a meeting of U.S. shale oil firms that an extension of a pact by OPEC and non-OPEC nations to trim almost 1.8 million barrels per day (bpd) from global markets in the first half of the year is not a good assumption to make for drilling plans. The supply response by shale drillers and other key producers outside the pact is setting the market tone. Oil prices had held steadily above $50 a barrel since the curb pact deal was reached at the end of November and earlier this week, Kuwait Oil Minister Essam Al-Marzouq told local reporters in the output cut pact has been largely supported by the cartel.
Marzouq said OPEC’s compliance so far stood at 140% and that non-OPEC nations led by Russia were in the region of 50% to 60%. Surveys have pegged OPEC compliance above 90% for January and February, with Saudi Arabia handling the load while some OPEC members, notably Iraq and Iran, are said to lag or in the case of Tehran use a higher quota to gain market share. Cartel members Libya and Nigeria are exempt.