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Oil prices slip as rising USA supplies offset OPEC cuts

04 March, 2017, 00:34 | Author: Paula Vaughn
  • U.S. oil production rose 0.3% to 9.032 million barrels per day last week hitting the highest level in nearly a year

The rise in production is consistent with the substantial increase in the number of rigs drilling for oil since May 2016.

Novak forecast Brent crude would average between $55 and $60 a barrel this year, with Russia's flagship Urals crude oil blend probably trading $2-$3 a barrel below that.

"While constructive, we continue to view Saudi Arabia's willingness to sacrifice market share beyond its commitment to OPEC as more of a temporary sprint than a more sustainable effort", Tim Evans, Citi Futures' energy futures specialist, said in a note. On the other hand, the USA rig-count is increasing due to rising WTI prices. The market is rather steady at the moment and we do not expect any firm trends next week.

As OPEC and 11 other nations reduce supply in an effort to end a three-year glut, USA producers are ramping up and potentially offsetting the curbs. OPEC's second-biggest producer pledged - after much opposition - to reduce its daily output by 210,000 barrels but it has not yet reached the mark. This puts considerable pressure on oil, though bears have been disappointed.

OPEC members lost over US$2 trillion in revenues and capital expenditure in the oil price crash, the cartel's director general Mohammed Barkindo said, speaking to media in Nigeria. There is not a lot of spare production capacity by historical standards, and after the OPEC cuts are unwound, there will probably be a gradual increase in output, which will thin capacity out even more. So, once again bulls got active.

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USA crude stockpiles rose for the eighth straight week, and production climbed further above the 9 million-barrel-a-day mark, according to government data out Wednesday.

Prices, however, stayed on track to register a loss for the week, fueled by rising US crude production, record domestic supplies and strength in the dollar. Besides, a more optimistic commentary from US management teams implies more stable output, with a possible return to volume growth.

Zangeneh further announced that the Iranian Ministry of Petroleum is bent on raising export of petroleum products, adding gasoil and petrol will be the only main liquids consumed in Iran's energy mix by next year.

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut. The active futures were higher in price than the expiring futures contracts in the fund. The market may tank once June arrives and OPEC decides not to extend the deal. Loading programs for the four crudes that underpin dated Brent showed a rise to 908,000 barrels per day, from March's 884,000 bpd.

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