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vegassports-odds.com April 28, 2017


Oil prices plummet amidst increasing USA drilling activity and steady OPEC supply

21 March 2017, 01:51 | Melvin Schneider

While the compliance to output cuts has been almost 100 per cent from the Opec side, relative non-compliance of Non-Opec coupled with steadily climbing USA production is keeping prices under pressure.

Global benchmark Brent crude fell as low as $51.01 a barrel this morning while West Texas Intermediate slipped to $47.84.

WTI crude has "found itself vulnerable to heavy losses.as the rising drilling activity in the US reinforced the oversupply fears", said Lukman Otunuga, research analyst at FXTM, in a note. Producers added more oil rigs to USA fields, extending a drilling surge into a 10th month, Baker Hughes Inc. said on Friday.

Baker Hughes reported that in the week leading up to 17 March, US shale companies added 14 oil rigs, increasing the number of operating rigs to 631, the most since September 2015.

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

"We have already seen how worries of a border-adjustment tax moved the crude forward curve in the first few weeks following [President Donald] Trump's inauguration", said Troy Vincent, oil analyst at ClipperData. Members which agreed to the production freeze and cuts were able to reduce production from 29.9 million to 29.7 million bpd. So far, crude oil prices and broader markets such as the S&P 500 (SPY) (SPX-INDEX) are diverging in 2017. OPEC in November agreed to manage collective production, leaving the United States in a unique position to influence crude oil prices. For more on crude oil prices, read Part 1 of this series.

Opec and its allies improved their collective compliance with cuts last month as deeper curbs from members offset weaker implementation from other producers, according to two delegates familiar with the conclusions of a meeting in Vienna on Friday.

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. IEA data showed that crude stocks in the OECD nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels.



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