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Oil prices drop on rise in U.S. drilling

Published 20/03/2017, 11:41 am
© Reuters.  Oil prices drop on rise in U.S. drilling
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* Speculators cut long positions in U.S. crude

* OPEC supplies also remain high despite cuts

* But AB Bernstein says OPEC cuts are about to bite

By Henning Gloystein

SINGAPORE, March 20 (Reuters) - Oil prices fell on Monday as rising U.S. drilling activity and steady supplies from OPEC countries despite touted production cuts pressured already-bloated markets.

Prices for front-month Brent crude futures LCOc1 , the international benchmark for oil, were 20 cents below their last settlement at 0025 GMT, at $51.56 per barrel.

U.S. West Texas Intermediate (WTI) crude futures were down 28 cents at $48.50 a barrel.

Traders said that prices were under pressure due to rising U.S. drilling activity and ongoing high supplies by the Organization of the Petroleum Exporting Countries (OPEC) despite its pledge to cut output by almost 1.8 million barrels per day (bpd) together with some other producers like Russia. oil has attempted to break out of the trading range that formed last year ... However, this uptrend has stalled," futures brokerage CMC Markets said in a note on Monday. "Now there is good, strong momentum to the downside."

U.S. drillers added 14 oil rigs in the week to March 17, bringing the total count up to 631, the most since September 2015, energy services firm Baker Hughes Inc BHI.N said on Friday, extending a recovery that is expected to boost shale production by the most in six-months in April. nL2N1GR0OP

As a result, U.S. oil output has risen to over 9.1 million bpd from below 8.5 million bpd in June last year. C-OUT-T-EIA

Reacting to the ongoing glut in markets, financial oil traders cut their net long U.S. crude futures and options positions in the week to March 14, the third consecutive cut, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. rising sentiment that oil markets remain oversupplied, some analysts say markets will tighten soon, arguing that the OPEC-led cuts will only start to bite from April, just as demand picks up as refineries return from current maintenance outages.

"The cuts in OPEC production from the start of 2017 should start to show up between mid-March (now) and mid-April. Over the coming weeks we expect a sharp reduction in imports and increase in refining runs which should lead to impressive crude inventory draws," analysts at AB Bernstein said on Monday in a note to clients.

"The combination of falling imports and stronger crude runs should lead to substantial inventory cuts over the coming months," they said.

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