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Oil ends lower as rising USA rig count, G-20 statement unnerves

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Members of the Organization of Petroleum Exporting Countries (OPEC) favor extending production cuts beyond June to continue efforts to rebalance global oil markets, according to a new report by Reuters.

Brent crude, the global benchmark, has dropped by nearly 7pc this month to $51.79/barrel while U.S. marker West Texas Intermediate has fallen by almost 10pc to $48.73/barrel.

Prices for benchmark Brent crude futures were 35 cents, or 0.68 percent, below their last settlement at 0646 GMT, at $51.41 per barrel.

"The OPEC cuts are real and are cleaning up the market", Citigroup analysts including Seth Kleinman wrote in a report earlier this week.

"This unwinding of position is both a cause and reflection of the big fall in crude oil prices when the cracks in the Opec/non-Opec deal emerged and when it seems like it became evident shale oil is back and the new swing player", said chief market strategist Greg McKenna from brokerage AxiTrader.

Brent Crude Oil Spot Price, data by YCharts.

USA drillers boosted the rig count by 14 to 631 last week, data from Baker Hughes showed. While the compliance to output cuts has been almost 100 per cent from the Opec side, relative non-compliance of Non-Opec coupled with steadily climbing U.S. production is keeping prices under pressure. It also expects the cartel to maintain its agreed six-month production quota at around 32.5m barrels per day (bpd) for the rest of the year.

"OPEC heavyweights such as Saudi Arabia are not happy with the return of shale oil in full force and have to make a hard choice between losing part of their market share or steady income", another source from a non-Gulf OPEC producer said.

Crude oil is likely to continue to drift lower over the near-term if supply continues to increase. As the week ended, Saudi Arabia and Russian Federation sent mixed messages on the future of the production cuts agreed to by the Organization of Petroleum Exporting Countries and 11 other nations.

As populist candidates and parties continue to perform well in elections across Europe and the USA, the impact this shift will have on the workings of the world economy still remain unclear.

In other related vegetable oils, soybean oil on the Chicago Board of Trade climbed as much as 0.9 percent, while the September soybean oil contract on the Dalian Commodity Exchange rose up to 0.8 percent.

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