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Published: Fri, February 03, 2017
Economy | By Melissa Porter

Crude Oil Back Above USD54 Even As US Production Surges

Crude Oil Back Above USD54 Even As US Production Surges

Many market watchers said prices are likely to stay in a narrow range for now, with prices caught between the production cut and the prospect for renewed US oil drilling.

A Reuters report showed that OPEC members have achieved nearly 82% of their production cut goal in January under the terms of their agreement to cut supply by 1.16 million bpd.

Brent crude LCOc1 settled up $1.22 a barrel at $56.80.

Higher production from some members of the Organization of Petroleum Exporting Countries and from USA shale tipped the scales since the middle of the decade and eventually pushed crude oil prices to historic lows a year ago.

With uncertainty over the final outcome of OPEC's cuts and also little known so far regarding Russia's commitments to its supply reductions, crude futures have been range-bound, trading within a $2 per barrel range over the past week, and within $1.25 a barrel since Monday.

USA crude oil stockpiles increased by 6.5 million barrels to 494.76 million barrels, according to the Energy Information Administration.

The ministry said that countries joined the Vienna agreement will present monthly reports on oil output to the technical commission.

American oil companies are poised to export up to 800,000 barrels of oil per day in 2017 if President Trump fulfills his promises to ease restrictions and promote oil production.

Anthony Starkey, the manager of energy analysis for S&P Global Platts, said in an emailed report that most of the recent gains in US oil production came from offshore and Alaska.

Instead, they have reduced deliveries to Europe and the Americas as they implement a coordinated agreement to cut supply by about 1.8 million barrels per day (bpd), seeking to reduce a global supply glut and lift oil prices.

Although Reuters this week reported high compliance among OPEC cutback participants and says Russian Federation has cut production in January by about 100,000 barrels per day, Stephen Brennock, analyst at PVM, thinks any hopes of sustained recovery in price "will depend on increasing efforts by OPEC to curb output, though the prospect of an upside breakout will be undermined by the budding revival in US crude production". That energized bulls to push crude upward, he said.

According to a Reuters survey, the compliance level of the promised output cut is above 80%.

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