Oil prices started the week slightly lower Monday, pressured by a rising U.S. rig count, even as the price of crude continues to hover near record three-year highs.
, the global benchmark, was down 0.2% at $69.73 a barrel, on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures
were trading down 0.1%, at $64.24 a barrel.
Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. last week rose by 10 to 757. The U.S. oil rig count is generally viewed as a proxy for activity in the sector.
“I expect the rig count to continue to increase,” as U.S. shale producers ramp up production, said Georgi Slavov, head of research at brokerage Marex Spectron.
But Slavov said prices have largely been supported in recent weeks by money managers’ “exceptional” net long positions on the market and a “dollar under pressure.” Both Brent and WTI have posted gains for four straight weeks and prices have risen more than 50% since 2017 lows last June.
The ICE dollar Index
sank to a new three-year low Monday, driven by expectations of monetary-policy tightening. A weaker U.S. currency makes dollar-traded oil less expensive for foreign buyers, generally boosting prices.
Managed money net long positions last week hit a record high of over 432,000 lots, according to consultancy JBC Energy.
“From a fundamental perspective, the surge in U.S. managed money raises a clear red flag for us,” JBC analysts wrote in a note Monday.
The consultancy predicts the price of WTI falling over the next two months as a result of the rising U.S. production.
But even as U.S. shale oil production has been rising, the market has looked to more bullish factors in recent weeks. That includes perceived geopolitical threats to supply from the Middle East, declining petroleum inventories and strong compliance with an OPEC-led agreement to curb crude output.
The Organization of the Petroleum Exporting Countries and 10 producers outside the cartel, including Russia, agreed late last year to extend an accord to hold back production by 2% through the end of this year. The agreement was first reached in late 2016 in an effort to rein in the global supply glut and boost prices that have languished since late 2014.
“Inventories are coming down faster than we expected and OPEC is succeeding in rebalancing the oil market,” analysts at Bank of AmericaMerrill Lynch wrote in a note Monday.
Among refined products, Nymex reformulated gasoline blendstock
— the benchmark gasoline contract — was flat, $1.85 a gallon. February heating oil
was down 0.1% at $2.08 a gallon, while February natural gas
was down 1.7% to $3.15 per million British thermal units.