Oil falls on prospects of rising output in Canada, Africa
NEW YORK, United States — Oil prices fell Monday on expectations for stronger production in North America and Africa and tepid global demand growth.
Rising uncertainty about Britain’s vote next week on remaining in the European Union, as well as a US interest rate decision Wednesday by the Federal Reserve’s policy arm, the Federal Open Market Committee, also stirred a certain amount of caution in the oil market.
“Investors seem to have backed away from buying ahead of either this week’s FOMC meeting or Britain’s referendum on EU membership on June 23,” said Tim Evans of Citi Futures.
US benchmark West Texas Intermediate for July delivery fell 19 cents to $48.88 a barrel on the New York Mercantile, its third straight session in the red.
In London, Brent North Sea crude for delivery in August, the international benchmark, also shed 19 cents, ending the session at $50.35 a barrel.
“The fact that maybe Libya is finally reaching the level of stability that the UN-supported government will be able to control most of the oil-export facilities” is a factor weighing on the market, said Mike Lynch of Strategic Energy and Economic Research.
In addition, there were signs that Nigeria’s unplanned outages may end after a militant group on Sunday urged another armed group, the Niger Delta Avengers, to join negotiations with authorities and put down their weapons.
Canadian oil production, which dropped by about 1.2 million barrels a day during the peak of wildfires in May, is expected to slowly recover as the blazes diminish.
For Oliver Sloup of iiTrader.com, a lot of the market unease was due to Friday’s Baker Hughes oil rig report that showed the number of active US rigs rose for the second week in a row, pointing to a possible coming upturn in US output.
“We are seeing some rigs come back on line,” Sloup said. “Three times is a trend. If we continue to see that happen you’re going to see prices run out of steam.”
Meanwhile June report of the Organization of the Petroleum Exporting Countries kept its global oil demand forecast for this year unchanged at 94.18 million barrels a day, up 1.2 million barrels from last year.
But OPEC forecast that “the excess supply in the market is likely to ease over the coming quarters.”