Oil declined the most since March as a rebound in U.S. drilling added to signs that producers will keep pumping into an oversupplied market.
Both Brent crude and West Texas Intermediate dropped more than 4 percent for the week as Baker Hughes reported Thursday that the number of active rigs seeking oil climbed by 12 to 640. It was the first gain since December. With four days left to resolve nuclear talks in Vienna, Iran was said to be pushing for accelerated sanctions relief, which may push more crude into the world market.
Oil’s recovery from a six-year low in March has faltered amid speculation that rising prices will spur production and prolong a surplus. OPEC’s output expanded last month to the highest level since August 2012 as Iraq pumps at a record pace, a Bloomberg survey showed this week.
“The rig count just confirms our view that U.S. shale producers are more resilient than many thought a few months back,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said by e-mail. “U.S. drillers still benefit from efficiency gains and falling costs.”
Brent for August settlement slid $1.75, or 2.8 percent, to $60.12 a barrel Friday on the London-based ICE Futures Europe exchange, extending the weekly decline to 4.6 percent. The European benchmark crude traded at a premium of $4.87 to WTI, compared with $3.63 on June 26.
WTI for August delivery fell as low as $55.41 a barrel in electronic trading on the New York Mercantile Exchange, the lowest price since April 21. There was no floor trading in New York because of the observance of the U.S. Independence Day holiday. WTI settled Thursday at $56.93, down 4.5 percent for the week. Electronic transactions will be booked Monday for settlement purposes.
Drillers in the U.S., the world’s biggest oil consumer, have idled more than half the nation’s rigs since December. Production remains near record levels in weekly Energy Information Administration records dating back January 1983.
Crude inventories climbed to 465.4 million barrels in the week ended June 26, data from the Energy Department’s statistical arm showed. That’s more than 90 million above the five-year average for this time of the year.
Negotiators haven’t yet agreed on the scale and speed of sanctions relief for Iran, nor have they settled on the corresponding steps Iran must take, four diplomats said, asking not to be named in line with rules. One of the diplomats said Iran may get substantial sanctions relief by December, while others said sanctions are unlikely to be eased before 2016.
The U.S. and five other global powers are seeking an agreement with Iran to curtail its nuclear program in exchange for removing sanctions that have reduced oil output to the lowest level since 1990. The negotiations, now in their 21st month, have been extended to July 7 from June 30.
There is “total commitment of all participants to end this process in the next few days,” Sergei Ryabkov, Russia’s deputy foreign minister and top negotiator, told reporters in Vienna late Thursday. The sanctions imposed in 2012 have curbed Iran’s oil exports by about 50 percent.
Oil in New York traded in a $5 range in June, the narrowest in 19 months. Volume was the lowest since December and open interest, or the number of futures contracts outstanding, was the least since January. WTI, which has fluctuated at about $60 a barrel for the past two months, will average $59 in the third quarter and $63 in the fourth, according to forecasts from 22 analysts compiled by Bloomberg.
The Organization of Petroleum Exporting Countries, whose 12 members supply about 40 percent of the world’s oil, pumped 32.1 million barrels a day in June, a Bloomberg survey of producers and analysts showed. That’s a gain of 744,000 a day from May. Iraqi output increased to a record 4.39 million a day.
Twenty of 33 analysts and traders, or 61 percent, were bearish on WTI in a separate Bloomberg survey through Thursday. Seven respondents were bullish while six were neutral.