Published: Sun, April 30, 2017
Economy | By Melissa Porter

Oil prices regain some ground, but oversupply weighs

On April 18, oil prices dropped, hitting their lowest in 11 days, following the US Energy Information Administration said it estimates for a combined 124,000 barrels-per-day growth in US shale production over May, Reuters reported. Despite a drop in US crude stocks last week, an unexpected 1.5-million-barrel build in gasoline stocks drove prices more than 3.5 percent lower on Wednesday.

US crude futures closed the day down 3.76 percent, trading at $50.44 per barrel and hovering only slightly above the key $50 level, while Brent crude futures dropped almost $2.30 to trade around $52.70 a barrel.

"The market sentiment appears to be that the increases in USA shale production outweighs the OPEC action and the market is keeping the loss we had yesterday", he said.

OPEC and non-OPEC producers agreed in December to cut supplies for six months, helping lift oil prices to about 55 dollars a barrel after a two-year slump. Prices were at around $52.42 prior to the release of the inventory data.

OPEC and non-OPEC producers said after talks in Kuwait last month that they were looking into extending the output cuts, as compliance with the agreement has increased.

Members of the Organization of the Petroleum Exporting Countries are cutting oil production 1.2 million bpd from January 1 for six months, the first reduction in eight years.

Global benchmark Brent crude futures swooned as low as $54.61, the lowest since April 7, then settled down 47 cents at $54.89 a barrel. USA inventories of 532 million barrels remained near all-time records reached in March.

"Non-OPEC compliance will improve over the next two months with Russian Federation driving the largest reductions in volume terms", BMI said. The total volume of oil that was traded hovered around 14% under the 100-day moving average.

Patrick Pouyanne, the chief executive of French oil and gas giant Total, said on Thursday prices could fall again by the end of the year due to a rapid increase in US shale production.

Oil prices did, however, gain some net support from a stabilisation in risk conditions with WTI edging above the $51.00 level in early Europe. A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

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