June 2, 2017 / 12:52 AM / 3 months ago

Oil drops on fears of more U.S. drilling after climate deal withdrawal

FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada July 21, 2014.Todd Korol/File Photo

NEW YORK (Reuters) - Crude fell more than 1 percent on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump's decision to withdraw from an international climate accord will spur further domestic production and contribute to a persistent global oversupply.

Brent crude futures LCOc1 were down 61 cents at $50.02 per barrel by 2:00 p.m. (1800 GMT), while U.S. West Texas Intermediate crude CLc1 futures fell 62 cents to $47.74 per barrel.

Both contracts were on track for a weekly loss of about 4 percent.

Market analysts are troubled by a growth in U.S. crude production that is straining efforts from the Organization of the Petroleum Exporting Countries to reduce global oversupply.

U.S. drillers this week added 11 rigs, in a record stretch of 20 straight weeks of additions, data from energy services company Baker Hughes showed. [RIG/U]

Trump's withdrawal from the Paris agreement, the landmark 2015 global pact to fight climate change, drew condemnation from Washington's allies and many in the energy industry - and sparked fears that U.S. oil production could expand more rapidly than it is currently.

“Trump seems to be removing any barriers he can find that would obstruct growth of crude oil or natural gas,” said Stewart Glickman, energy equity analyst at CFRA in New York.

"It’s kind of ironic because by doing that you’re encouraging more volumes to come out of the ground."

U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels and hit 9.34 million bpd, its highest since August 2015.[EIA/S]

U.S. output is expected to keep rising, as the U.S. Energy Information Administration forecasts production of about 10 million bpd next year.

Igor Sechin, chief of Russia's largest oil producer, Rosneft, said U.S. producers could add up to 1.5 million bpd to world oil output next year.

Last week OPEC and some non-OPEC producers extended a deal to cut 1.8 million bpd in supply until March 2018. Oil prices are down around 10 percent since the extension, and OPEC officials have since suggested they may deepen the cuts.

Investors have been edgy due to the slow decline in inventories worldwide. U.S. inventories, however, fell 6.4 million barrels last week, their eighth straight weekly drawdown. "That's relatively higher than the average draws we’ve seen, so you would have thought that crude would have fared a little better," said CFRA's Glickman.

Additional reporting by Libby George and Sabina Zawadzki in London and Jane Chung in Seoul; Editing by Marguerita Choy and Adrian Croft

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