Oil Trims Weekly Drop as U.S. Production Falls Most Since 2013 

• U.S output fell 2.3%, stockpiles slide 7th week, EIA reports
• Stockpile decline was less than forecast, API report

Oil trimmed its biggest weekly decline in five months as investors weighed the largest drop in U.S. output since 2013 against a smaller-than-expected stockpile decline.

Futures rose as much as 1.4 percent in New York. Prices lost 4.8 percent Thursday after government data showed crude stockpiles fell 2.2 million barrels last week, less than the forecast 2.5 million-barrel decline and the 6.7 million drop reported by the industry-funded American Petroleum Institute. U.S. production slumped 194,000 barrels a day, or 2.3 percent.

Oil has traded between $45 and $51 a barrel in the last month after almost doubling from a 12-year low in February amid supply disruptions and falling U.S. output. The recovery has prompted U.S. producers to begin returning drilling rigs to service, leading to speculation the decline in production will slow.

“Steadily declining U.S. crude production continues to underpin our view that the global market has shifted from massive oversupply to broadly balanced in the second half,” Mike Wittner, head of oil market research at Societe Generale SA, said in a report.

West Texas Intermediate crude for August delivery rose as much as 62 cents to $45.76 a barrel on the New York Mercantile Exchange and traded at $45.44 at 10:10 a.m. London time. The grade fell $2.29 to settle at $45.14 on Thursday, the lowest since May 10. Prices are down 7.3 percent this week, the biggest drop since February. Total volume traded was about 25 percent below the 100-day average.

U.S. Output

Brent for September settlement gained as much as 67 cents, or 1.4 percent, to $47.07 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.40, or 4.9 percent, to $46.40 a barrel on Thursday. The global benchmark crude traded at a 55-cent premium to WTI for the same month.

Crude production in the U.S. tumbled to 8.43 million barrels a day in the week ended July 1, the lowest since May 2014, the EIA report showed. The number of active oil rigs in the U.S. has increased in four of the last five weeks, Baker Hughes Inc. data show. Explorers have idled more than 1,000 oil rigs since the start of last year.

U.S. crude inventories dropped a seventh week to 524.4 million barrels, the lowest since March 11, according to EIA data. Supplies have fallen from an 87-year high of 543.4 million barrels in the last week of April.

Oil-market news:

• A strike by oil workers in Nigeria entered a second day and a gradual shutdown of facilities is in progress, the Pengassan union said
• Argentina is importing crude for the third time this year, putting pressure on the government to ease its fixed price for domestic oil.
• While oil inventories and production continue to decrease, the EIA may be underestimating the output from drilled-but-uncompleted shale wells, Citigroup Inc.’s analysts including Eric Lee said in an emailed report dated July 7.

Source: Bloomberg

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