Oil dropped after U.S. producers increased the number of active rigs to the highest in 12 weeks, raising speculation output declines that have trimmed a global glut may slow.
Futures fell as much as 1.3 percent in New York after rising 0.6 percent on Friday. Rigs targeting crude in the U.S. rose by 10 to 351 last week, the highest since April 15, Baker Hughes Inc. said on its website. Money managers cut net long wagers on West Texas Intermediate to the lowest since March in the week ended July 5, Commodity Futures Trading Commission data show.
Oil has traded between $44 and $52 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 American producers to begin returning drilling rigs to service.
“When those rig numbers are up, we will see weakness in the oil price because it will bring on new supply,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “Anything where it shows that supply is potentially able to come back on-stream will cause constant problems.”
WTI crude for August delivery fell as much as 60 cents to $44.81 a barrel on the New York Mercantile Exchange and traded at $45.05 at 1:02 p.m. Tokyo time. Prices climbed 27 cents to settle at $45.41 on Friday. Total volume traded was about 27 percent below the 100-day average.
Brent for September settlement fell as much as 54 cents, or 1.2 percent, to $46.22 a barrel on the London-based ICE Futures Europe exchange. The contract advanced 0.8 percent to $46.76 a barrel on Friday. The global benchmark crude traded at a 67-cent premium to WTI for September delivery.
While U.S. production fell to the lowest since May 2014 at 8.43 million barrels a day in the week ended July 1, crude inventories remain at the highest seasonal level in at least a decade. The number of active oil rigs in the U.S. has increased in five of the last six weeks, according to Baker Hughes. The count is still down by more than 1,000 from the beginning of last year.
Hedge funds’ net-long position in WTI fell by 9,931 futures and options combined to 169,499, the sixth decline in seven weeks, CFTC data showed. Shorts, or bets on falling prices, increased 8.4 percent, while longs decreased 0.3 percent.
Trafigura Group Pte. is using Milford Haven, which can hold about 9 million barrels of crude and refined products in its 54 tanks, as a back-stop in a supply chain stretching about 8,000 kilometers (5,000 miles) from the oil ports of Texas to the refineries in north-west Europe, including the Rotterdam trading hub. Commodity markets “lurch toward rebalancing” as global demand continues to grow at a moderate rate, while capital-expenditure cuts reduce supply, Citigroup Inc. analysts led by Ed Morse said in an e-mailed note.