Steady moderation in China, the world's second-largest economy, helped pull crude oil prices lower in early Monday trading. File photo by Monika Graff/UPI | License Photo
May 1 (UPI) -- The steady rise in U.S. exploration and production figures, coupled with a slowing Chinese economy, helped drag crude oil prices lower in early Monday trading.
Crude oil prices moved lower during the latter half of April as U.S. crude oil production recovered on the back of improved market conditions. On Friday, oilfield services company Baker Hughes reported nine more rigs added to the U.S. fleet for the week ending April 28, putting the upstream sector on par with levels from 2015.
On Monday, the U.N. Economic and Social Commission for Asia and the Pacific reported Chinese economic growth is on a slow track downward. Representing about 42 percent of the gross domestic product from the developing economies in the Asia-Pacific, the U.N. body said Chinese demand was subdued as growth moderated from 6.9 percent in 2015 to 6.7 percent last year.
"Output growth is expected to soften further to 6.5 percent in 2017 and 6.4 percent in 2018," a report issued from Bangkok found.
The downturn for the second-largest economy in the world pulled oil prices lower in early Monday trading. The price for Brent crude oil was down 0.8 percent to $51.63 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.75 percent to $48.96 per barrel.
U.S. exploration activity and the slowing Chinese economy comes amid growing mid-term supply pressures. Last week, Libyan officials said operations have resumed at one of the larger regional oil fields, giving the OPEC member room to grow.
There may be signs of supply-side pressures easing ahead of the busy summer travel season. Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily newsletter there are signs the market may be on the cusp of a supply deficit for the first time in more than 10 years. According to U.S. government data, rig counts are on the rise, but so are energy sector costs.
"That is the first significant increase in drilling costs in three years and that should continue to rise," Flynn said. "With the rapid increase in drilling rigs, oil service and labor costs will go higher."
Texas regulators reported total wells completed so far in 2017 are down 44 percent year-over-year to 1,925. Wells completed loosely equates to commercial prospects, with completions indicating an operation is close to actual production.
Trading may be muted today as many countries take a bank holiday May 1 to commemorate Labor Day.