Speculators cut bullish oil bets for a fourth week, missing a market rebound.
Hedge funds and other money managers decreased net-long positions in West Texas Intermediate crude by 9.1% since January 13, US Commodity Futures Trading Commission data show.
Futures climbed for a third week as companies including Apache Corp. and Total SA announced spending cuts. Bad weather kept tankers from loading in southern Iraq and Libya’s production decreased.
Baker Hughes Inc. said rigs targeting oil in the US dropped to the lowest in almost five years.
“To maintain production growth you are going to have to drill more,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone February 13. “There’s loading issues in Iraq and production issues in Libya. Some people were caught off guard. The fundamentals are changing here.”
Oil is still 50% below last year’s peak as US production stayed at a three-decade high and the Organization of Petroleum Exporting Countries exceeded its output quota in January for an eighth month. Further price declines are needed for US output growth to slow enough to balance global markets, Goldman Sachs Group Inc. said in a February 10 report.
WTI futures rose $3.94, or 8.1 percent, to $52.78 a barrel on the New York Mercantile Exchange Thursday and Friday. Prices had dropped $3.03, or 5.7%, in the week covered by the CFTC report.
US oil explorers idled rigs for the 10th straight week to extend an unprecedented retreat in drilling. The rig count fell by 84 to 1,056 last week, the lowest since August 2011, Baker Hughes said February 13.
Houston-based Apache, among the biggest operators in the Permian basin in Texas, is cutting its oil-drilling rigs by 70%, the company said February 12. Total will reduce the budget for exploration by 30% to less than $1.9 billion, the company said the same day.
“The market’s looking at the drop in the rig count, and saying that these drops are going to eventually bring down production,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone on February 12.
Weather delays may reduce shipments from Iraqi ports by 1 million barrels a day this month, according to Petromatrix GmbH.
In Libya, crude output fell 150,000 barrels a day to 300,000 in January, the least since June, according to a Bloomberg survey. Output fell further after a fire at a pipeline that carries crude to the port of Hariga.
The state-run oil company warned that it would shut production at all fields if authorities fail to stem attacks on facilities.
WTI for March delivery fell 11 cents to $52.67 a barrel in electronic trading on the New York Mercantile Exchange at 1:50 p.m. Singapore time.
“A lot of the oversupply is very tenuous, and that’s why we are prone to rebound,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said February 13. “We are on a tripwire really.”
The decline in the rig count has yet to be reflected in U.S. production. The Energy Information Administration forecast production will increase 7.8% to 9.3 million barrels a day this year, the most since 1972. Crude stockpiles rose to 417.9 million barrels in the week ended Feb. 6, the most in weekly data beginning 1982.
“Crude oil is a supply-driven product,” Michael Hiley, head of over-the-counter energy trading at LPS Partners Inc. in New York, said by phone February 13. “Production is staying up in the U.S. and we are going to continue to build inventories.”
Net-long speculative positions in WTI fell 4,231 contracts to 203,696 futures and options in the week ended February 10, according to the CFTC. Short bets slipped 8,009 to 98,032 and longs declined 12,240 to 301,728.
In other markets, bearish wagers on US ultra low sulfur diesel increased 11 percent to 32,868 contracts as the fuel sank 0.7% to $1.8327 a gallon in the report week.
Net short wagers on US natural gas climbed 14% to 46,359. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures US Henry Hub contract. Nymex natural gas fell 2.8% to $2.677 per million British thermal units in the week covered by the report.
Bullish bets on gasoline rose 2.8% to 53,972 as futures declined 3.1 percent to $1.5523 a gallon on Nymex.
Regular gasoline at US pumps climbed 0.4 cent to average $2.25 a gallon February 15, the highest since December 30, according to Heathrow, Florida-based AAA, the country’s largest motoring group.
“US production hasn’t started to decline yet, but it is probably going to go flat in June, maybe as early as May,” James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, said by phone February 13. “We’ll have a decline in production in the second half.”
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