Oil extends slide below US$50 as US rigs rise to 8-month high

An oil well near Tioga, North Dakota, on Aug 21, 2013.
An oil well near Tioga, North Dakota, on Aug 21, 2013. PHOTO: AFP

SEOUL (BLOOMBERG) - Oil slipped as US drillers added rigs for a sixth straight week, extending declines below US$50 (S$68.67) after Russia cast doubt over a deal any time soon with Opec on output cuts.

Futures lost as much as 1.3 per cent in New York on Monday (Oct 10) after dropping 1.3 per cent on Friday.

The number of active US oil rigs climbed to the highest since February, rising by 3 to 428, according to Baker Hughes data. Russia's Energy Minister Alexander Novak said he doesn't expect to sign a deal with Opec during the World Energy Congress this week in Istanbul following the group's agreement last month in Algiers to cut output.

Oil has gained about 10 per cent since the Organization of Petroleum Exporting Countries agreed on Sept 28 to cut production for the first time in eight years. Opec members will meet this week for talks on implementing the deal and will decide on quotas at the group's official meeting in Vienna on Nov 30. US output halted its drop to the lowest in more than two years as producers haven't reduced drilling activity since the end of June.

"That turnaround in the US is threatening to derail the current rally," Michael McCarthy, a chief market strategist at CMC Markets, said by phone from Sydney. "Any sustained move above US$50 will only bring more of those rigs off the sidelines, and I think that's one of the reasons the market is getting a sense we're near a top at the moment."

West Texas Intermediate for November delivery lost as much as 66 cents to US$49.15 a barrel on the New York Mercantile Exchange and was at US$49.24 as of 10.23am Hong Kong time. Prices slipped 63 cents to close at US$49.81 a barrel on Friday. Total volume traded was about 6 per cent below the 100-day average.

Brent for December settlement fell as much as 63 cents, or 1.2 per cent, to US$51.30 a barrel on the London-based ICE Futures Europe exchange on Monday. The contract declined 58 cents, or 1.1 per cent, to US$51.93 a barrel on Friday. The global benchmark crude traded at a US$1.56 premium to WTI for the same month.

The bilateral meetings Russia's Novak will hold with Opec ministers in Istanbul will be an "important step toward reaching an agreement on capping oil production," his ministry said in a statement on Friday. Russia sees the possibility of a deal being reached by the time the group holds its official meeting in Vienna at the end of next month, according to the ministry.