Rising U.S. rig count and oil production—along with a firmer U.S. dollar—sent oil prices down by 1 percent early on Monday, but the spread between the U.S. benchmark WTI and the international Brent benchmark dropped to below $4.00 a barrel—the tightest since August amid dropping U.S. inventories.
At 10:01 a.m. EST, WTI Crude was down 0.83 percent at $65.59, while Brent Crude was down 1.10 percent at $69.38.
Last week, the number of active oil and gas rigs in the United States rose by 11 total rigs, according to Baker Hughes data. The number of oil rigs jumped by 12 after falling the previous week, and U.S. crude oil production rose again, to 9.878 million bpd, from 9.750 million bpd the week before, setting another new high.
“The news overall so far today has been bearish -- the rig count was up and Iran’s oil minister warned about too high prices,” Giovanni Staunovo, commodity analyst at UBS Group AG, told Bloomberg on Monday.
Iran’s Oil Minister Bijan Zanganeh has said that oil prices at $60 a barrel is “good,” but warned that prices higher than that would encourage more production from more expensive sources of oil supply such as U.S. shale, which would lead to a drop in oil prices.
Despite the Monday drop, oil prices are still set to post their best January in five years. According to Reuters estimates, Brent has gained 6.3 percent this month, which, so far, is the strongest January increase since 2013. Related: Self-Driving Cars Gain Acceptance
Over the past few weeks, strong global oil demand with robust economic growth worldwide has supported oil prices, but a major driver of the rally has been the weakening of the U.S. dollar that has had six weeks of declines in a row.
Analyst say that money managers continue to bet on rising oil prices, but this also increases the potential for price corrections.
“We believe that today’s oil prices project a too rosy picture, stick to our cautious view, and view the market as being at risk from profit-taking,” Julius Baer’s head of macro and commodity research Norbert Ruecker told Reuters.
By Tsvetana Paraskova for Oilprice.com
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