Mubasher: Oil prices dropped on Monday as drilling activity in the US picked up steam, while trade concerns weighed on financial markets.
By 8:40 am GMT, global benchmark Brent futures declined 0.29% to $61.29 per barrel (pb), while US Nymex crude futures fell 0.87% to $52.26 pb.
For the second time in three weeks, US energy firms added seven oil rigs, bringing the total count to 854 in the week ended 8 February, a report by Baker Hughes showed on Friday.
This implied a further rise in US crude production, which already hit a record of 11.9 million barrels per day (bpd).
In the same vein, the head of Russian oil company Igor Sechin has informed President Vladimir Putin in a letter that Moscow’s deal with the Organization of Petroleum Exporting Countries (OPEC) to withhold output poses a strategic threat.
The so-called OPEC+ deal has been in place since 2017, with the aim to curtail a global supply glut.
The agreement was extended several times and under the latest update, participants are slashing output by 1.2 million bpd until the end of next June.
OPEC and its allies will meet on 17 and 18 April in Vienna to review the agreement.
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 US-China trade dispute,” Vanda Insights’ founder Vandana Hari said in a note.
Trade talks between the US and China resumed this week, as a delegation from Washington was travelling to Beijing for the next round of discussions.
The US threatened to raise tariffs already in place on Chinese goods on 1 March, should the trade negotiations failed to produce a deal.
However, the drop in oil prices was capped by the US sanctions against Venezuela, hitting its state-run company Petroleos de Venezuela (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,” Australia and New Zealand (ANZ) bank said on Monday.