Seoul (Reuters): Oil prices dropped to their lowest in three months on Monday despite OPEC efforts to curb crude output, dragged down as U.S. drillers kept adding rigs.
Brent crude LCOc1 had fallen 35 cents, or 0.68 percent, to its lowest since Nov. 30 at $51.02 per barrel by 0231 GMT. It closed the previous session down 1.6 percent at $51.37. U.S. West Texas Intermediate crude (WTI) CLc1 declined 42 cents, or 0.87 percent, to its weakest since late November at $48.07 a barrel.
US drillers added oil rigs for an eighth consecutive week, Baker Hughes said on Friday, as energy companies increased spending to take advantage of a recovery in crude prices since the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut output. OPEC and other major oil producers including Russia reached a landmark agreement late last year to rein in production by almost 1.8 million barrels per day (bpd) in the first half of 2017.
Overshadowing the curbs, crude inventories in the United States, the world's top oil consumer, surged last week by 8.2 million barrels. "With the market still digesting the big increase in inventories, oil prices are likely to remain under pressure today," ANZ bank said in a note. Hedge funds and other money managers cut their net long U.S. crude futures and options positions in the week to March 7, according to data from the U.S. Commodity Futures Trading Commission (CFTC) on Friday.
Michael McCarthy, chief market strategist at Sydney's CMC Markets, said markets would be dominated by expectations that the US Federal Reserve is set to hike interest rates this week. A rise in U.S. rates would likely buoy the dollar, making greenback-denominated oil more expensive for importing countries.
"The week ahead is packed with potentially market defining releases," said McCarthy. "However, the key to market performance this week is the response to the US lift in rates."