Crude oil tumbled to below $53 a barrel on Monday, amid heightened concerns that increased U.S. drilling activity may offset an OPEC-led effort to reduce output.
Crude futures declined by one percent in New York, counteracting last week’s 1.8% increase. U.S. drillers added 11 rigs last week, marking the longest stretch of gains in six years, according to Baker Hughes Inc. data.
Oil prices fell despite a comment from Khalid Al-Falih, the Saudi Arabia Energy Minister, who said the oil market is close to re-balancing.
The increased drilling activity in the U.S. is offsetting hopes that an extension of the OPEC-led agreement to reduce output will eliminate the oversupply threat.
West Texas Intermediate for May fell as much as 55 cents to trade at $52.63 a barrel before settling at $52.73 a barrel.
Brent and Crude Lower
Last week, futures tacked on 94 cents to trade at $53.18 per barrel.
Brent for June fell as much as 1%, or by 58 cents, to trade at $55.31 a barrel, a $2.27 premium to its WTI counterpart.
No crude futures were traded on Friday, as U.S. and U.K. markets were closed for Good Friday.
OPEC and other members of the reduced output agreement have thus far been compliant with the cuts they pledged to make, says the Saudi Arabia Energy Minister. Al-Falih added that inventories are rising slightly due to it being refinery maintenance season.
Comments from Iran sparked hopes that OPEC and non-OPEC producers would extend their output cuts beyond the first six months of the year. However, the Saudi Arabia Energy Minister said it’s still too early to discuss the possibility of an extension.
The increased drilling production in the U.S. counteracted China’s economic growth, which show a 6.9% increase in the first quarter of the year.
The number of U.S. drills increased to 683 last week, marking the highest increase in rig counts since April 2015. The number of working rigs in the U.S. has more than doubled from a low of 316 in 2016.