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Oil is falling on the raise of US rig count

Oil prices dropped on Monday as drilling activity in the United States grew, and a refinery fire in the US state of Illinois led to the closure of a large crude distillation unit.

Worries about faltering economic growth curbing fuel demand also have an impact on oil markets, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $52.17 per barrel at 0750 GMT, down 55 cents, or 1%, from their last settlement.

International Brent crude oil futures were down 27 cents, or 0.4%, at $61.83 a barrel.

In the US, energy companies last week increased the number of oil rigs operating for the second time in three weeks, Baker Hughes reported on Friday.

The companies added seven oil rigs in the week to Feb. 8, bringing the total count to 854, which shows a further rise in crude oil output in the US, which is already a record 11.9 million barrels.

WTI prices were also weighed down by the closure of a 120,000-barrels-per-day (bpd) crude distillation unit (CDU) at Phillips 66’s Wood River, Illinois, refinery following a fire on Sunday.

The head of Russian oil giant Rosneft, Igor Sechin, writes to Russian President Vladimir Putin that Moscow’s deal with the Organization of Petroleum Exporting Countries (OPEC) to withhold production is a strategic threat and plays in the hands of the United States.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang. It has been expanded several times, and on the last deal, participants have cut production by 1.2 million barrels by the end of June.

OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact.

“I don’t think Russia will just … pull out of the OPEC+ agreement … but I wouldn’t be surprised at all if the cuts by certain non-members of the cartel are wound down over the course of the year,” said Matt Stanley, a broker with Starfuels in Dubai.

Analysts said economic concerns were also weighing on crude oil futures.

Vandana Hari of Vanda Insights said in a note that crude prices were dragged down “as China returned from a week-long Lunar New Year holiday and regional stock markets plunged into the red amid resurgent concerns over the U.S.-China trade dispute”.

Washington-Beijing trade talks resume this week with a delegation of US officials traveling to China for the next round of talks. The United States has threatened to increase the tariffs already imposed on goods from China on March 1 if trade negotiations fail to reach an agreement.

Preventing crude prices from falling further have been U.S. sanctions on Venezuela, targeting its state-owned oil firm Petroleos de Venezeula SA (PDVSA).

“The issues in Venezuela continue to support prices. Reports are emerging that PDVSA is scrambling to secure new markets for its crude, after the U.S. placed additional sanctions on the country,” ANZ bank said on Monday.

 

Source: Reuters