Oil declines as OPEC members boost output, U.S. rig count gains

NEW YORK (Bloomberg) -- Oil declined as OPEC members added supply and U.S. producers increased drilling, threatening to compound a global surplus.

Futures fell by as much as 1.8 percent. Libyan output expanded to 560,000 bopd, according to the National Oil Corp., up from 540,000 last week. Iran repeated plans to boost production to 4 MMbopd. Nigeria aims to raise output by 400,000 bopd to 2.2 MMbopd, Oil Minister Emmanuel Ibe Kachikwu said in New Delhi. Rigs targeting crude in the U.S. rose for a seventh week to the highest since February, Baker Hughes Inc. said.

Oil has fluctuated near $50/bbl amid uncertainty about whether the Organization of Petroleum Exporting Countries will implement an agreement to reduce supply. An OPEC committee will meet later this month to try and resolve differences over how much individual members should pump. The details of how supply will be reduced needs to be finalized by the group’s next meeting in Vienna on Nov. 30.

"There’s a growing recognition that OPEC will have a hard time getting their act together," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida.

West Texas Intermediate for November delivery slipped 63 cents, or 1.3%, to $49.72/bbl at 12:08 p.m. on the New York Mercantile Exchange. Total volume traded near the 100-day average.

Iranian plans

Brent for December fell 60 cents, or 1.2%, to $51.35/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.22 premium to December WTI.

Iran is seeking to pump 4 MMbopd within two weeks, up from 3.89 MMbopd now, Ali Kardor, the managing director of National Iranian Oil Co., said at a conference in Tehran. The country is targeting an average daily output of 4.28 MMbbl of crude and 1 MMbbl of condensate within four years, Oil Minister Bijan Namdar Zanganeh said.

"There have been a lot of bearish OPEC headlines," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "The market is going to move up and down on OPEC headlines until questions are answered at the meeting on Nov. 30."

Drilling Activity American drillers added four rigs to 432 last week, Baker Hughes said Friday. Explorers have added more than 100 rigs since an expansion began in June.

U.S. crude supplies rose to 474 MMbbl in the week ended Oct. 7, according to the Energy Information Administration. That’s the highest for that time of year since the EIA began publishing weekly data in 1982. The agency is projected to report on Wednesday that stockpiles rose 2.1 MMbbl last week, according to the median of analyst responses in a Bloomberg survey.

“The U.S. rig count continues to grow,” said Hamza Khan, an analyst at ING Bank NV in Amsterdam. “The continual increase in the number of rigs does suggest that the upside in crude prices should be capped, with the threat of U.S. oil output returning.”

Money managers reduced bets on lower WTI prices by more than half in the past three weeks as OPEC agreed to its first deal to cut output in eight years. That drove net length to the highest since July 2014 in the week ended Oct. 11, Commodity Futures Trading Commission data show. Brent longs also rose, leaving the combined length of the two benchmark contracts at the highest in at least five years.

"There are an awful lot of longs in the market," Yawger said. "If prices continue to fall we could see them exit rather quickly."