March 23, 2018

Oil prices retreat as data point to continued gains in United States output

13 March 2018, 07:45 | Melvin Schneider

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Oil prices would have plunged even lower if OPEC and Russian Federation hadn't placed a restraint on production to avoid a glut or oversupply.

The news is expected to be light on Monday so most traders expect the price action to be driven by the U.S. Dollar and appetite for risk.

The rising concern of another supply disaster this week can lead to bigger problems such as another oil supply glut might hit the market. This has reduced some of the enthusiasm for oil, with investors weighing increased USA supply against the likelihood that OPEC will maintain production cuts that have been in effect for more than a year.

Unlike Middle Eastern nations such as Saudi Arabia, which wants high crude prices to boost the value of its IPO of state-run Aramco, Iran expressed its concern over steadily-rising US production by stating it wants to work with the Organization of the Petroleum Exporting Countries (OPEC) to keep prices at $60 and curtail the output. The country managed to overtake the production of the top exporter in the world, Saudi Arabia. Total output should now average 10.7 million barrels a day this year, up from a previous forecast of 10.6 million barrels a day. It has already surpassed top exporter Saudi Arabia, and by 2019 is expected to surpass top producer Russian Federation, which pumps out almost 11 million bpd.

The commodity's prices were down in the market today extending their prior loss from the previous trading session.

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Brent crude futures were down 32 cents at $64.63 a barrel by 1246 GMT, off an earlier high of $65.25, while U.S. West Texas Intermediate (WTI) crude futures were up 17 cents at $61.53 a barrel.

But in a sign that an early-year rally in crude oil may have fizzled out, money managers cut their combined net long positions in the six most important futures and options contracts linked to petroleum prices by 50-million barrels in the week to March 6.

Demand from Asia, particularly China, will continue to support prices.

In other news, on Sunday, Iranian oil minister Bijan Zanganeh said OPEC could agree in June to begin easing current production curbs in 2019, the Wall Street Journal reported.

The officials also mention that they are looking to delay the initial public offering of the Saudi Aramco until next year.

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