Published: Mon, April 03, 2017
Economy | By Melissa Porter

Saudi Arabia Cut Crude Exports in January After OPEC Agreement

This is more than 300 million barrels above the five-year average.

Investors are also eyeing increasing production in the US, where companies have been pumping over 9-million barrels a day for the past four weeks. With the removal of restrictions on exports of domestically produced crude oil at the end of 2015, crude oil exports increased.

US West Texas Intermediate (WTI) crude futures were down 18 cents, or 0.4%, at $48.08 a barrel.

Based on the current price at $47.56, the direction of the market today is likely to be determined by trader reaction to the downtrending angle at $48.14.

Thomson Reuters Oil Research and Forecasts data shows around 714 million barrels of oil are being shipped to Asia this month, up three per cent since December when the cuts were announced. Meanwhile, given that Libya and Nigeria are exempt from cuts, a rebound in their production will increase Opec output even if other members stick to their quotas. Production by all Opec members, including cut-exempted Nigeria and Libya, fell to 31.95 million bpd. A further significant increase in U.S. production levels would also undermine confidence. According to OPEC's calculations, Venezuela had average production of 2.004 million barrels per day in January. Rising US oil rig counts and production levels as companies ramped up operations to take advantage of the earlier pickup in crude oil price have led to oversupply while demand remains feeble. Shipments of crude oil by rail from the Midwest to the East Coast accounted for 77% of the decline.

"The risks that OPEC has painted itself into a corner can not be ignored and it may need to extend, or even increase, cuts if the response from shale producers is more vigorous than we now model", they said in a report.

Although the latest inventory reports from the American Petroleum Institute and the Energy Information Administration have shown a dip in stockpiles, market watchers doubt that this will be enough to shore prices back up.

"The solid weekly gain in US oil rigs continues and the market sees that", said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo.

In 2016, the first full year with no restrictions on exports of domestically produced crude oil, U.S.

"OPEC's market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience", USA bank Jefferies said on Wednesday in a note to clients, although it added that the cutbacks would likely start to show by the second half of the year if OPEC extends its production cuts beyond June.

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