Oil Drops a Second Day as U.S. Rig Count Decline Halts Amid Glut

Oil fell for a second day, extending declines from a three-month high, as the number of drill rigs active in the U.S. rose for the first time in three months amid a global glut.

Futures slid as much as 1.1 percent in New York after decreasing 1.9 percent Friday. Drillers put one rig back to work last week, marking the first addition since late last year, according to data from Baker Hughes Inc. Ecuador will propose a cut to output at a meeting next month of producers from within and outside OPEC to help boost prices, President Rafael Correa told reporters in southern Andean province of Morona Santiago.

“There is a bit of a correction after the spike above $40 because the market is still oversupplied and demand is sluggish, although it’s better than what it was,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. “An average of around $35 a barrel is likely in the second quarter. There are signs that the supply side is feeling the pinch and have been forced to act.”

Oil has recouped its losses this year after slumping to a 12-year low last month on speculation stronger demand and falling U.S. output will ease a surplus. Hedge funds and other speculators increased their net-long position in West Texas Intermediate futures and options by 17 percent in the week ended March 15 to the highest since June, U.S. Commodity Futures Trading Commission data show.

WTI for April delivery, which expires Monday, fell as much as 44 cents to $39 a barrel on the New York Mercantile Exchange and was at $39.07 at 8:03 a.m. Hong Kong time. The contract lost 76 cents to $39.44 a barrel on Friday. Total volume traded was about 49 percent below the 100-day average. The more-active May future was 23 cents lower at $40.91 a barrel.

Brent for May Settlement was down 9 cents at $41.11 a barrel on the London-based ICE Futures Europe exchange. The contract fell 34 cents, or 0.8 percent, to $41.20 on Friday. The global benchmark crude was at a premium of 20 cents to WTI for May.

--With assistance from Heesu Lee To contact the reporter on this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Andrew Hobbs

By: Ben Sharples

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