Growing US supply keeps oil under pressure

Ivan Schwartz
March 21, 2017

Oil prices rebounded from session lows sustained in early morning trade, after insider sources from within OPEC said Monday, that OPEC oil producers increasingly favour extending its deal to cut oil production beyond June but expressed the need for Russian Federation and other non-members to remain part of the initiative.

Prices for front-month Brent crude futures, the Global benchmark for oil, were at $51.76 per barrel at 0043 GMT, up 14 cents, or 0.3 percent, from their last close.

WTI Crude Futures slipped 28 cents at $48.50 per barrel.

It is no longer news that OPEC has succeeded in getting its member nations to agree to cut their crude oil output in a bid to end the supply glut that has kept oil prices depressed for much of the last three years.

Defying rising sentiment that oil markets remain oversupplied, some analysts say markets will tighten soon, arguing that the Opec-led cuts will only start to bite from April, just as demand picks up as refineries return from current maintenance outages.

"As such, average oil prices for 2017 are not expected to exceed $60 per barrel".

This indicates the United States shale oil industry, hit by low energy prices, is returning to the market.

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Recent reports showed that oil production from the USA shale producers would increase next month, according to the United States Energy Information Administration (EIA). Saudi Arabia pledged to cut production to 10.058 million barrels a day under the deal.

Last week, Petronas decided on US$45 a barrel as its conservative estimate for this year as it prepares for another challenging year ahead.

"Beyond the nervousness about this legacy supply and concerns about rising production today from some non-OPEC countries; the implementation of the OPEC production agreement appears in February to have maintained the solid start seen in January".

But Iraq has lagged behind other Opec members in its efforts to reduce output.

The International Energy Agency (IEA) has forecast Iran expanding its crude oil production by 400,000 barrels per day to 4.15 million bpd by 2022.

The Organization of Petroleum Exporting Countries and other producers including Russian Federation agreed to reduce output by 1.8 million barrels a day in the first half of 2017 to rebalance the market.

Other reports by GizPress

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