Price Of Crude Oil Dips On Supply Glut Concerns
- Author: Anthony Vega May 10, 2017,
May 10, 2017, 0:20
But ongoing high supplies have resulted in crude oil prices falling back below $50 per barrel.
Saudi energy minister Khalid al-Falih said Monday at an industry conference in Kuala Lumpur that he was confident that the crude oil output cut deal will be extended by six months or more as the market was moving towards rebalancing. U.S. West Texas Intermediate futures were down 32 cents at $46.11 per barrel, off the day's high of $46.78.
The firm said its 2017 forecast of $50 a barrel for Brent crude now faced a clear "downside risk" as United States shale production continued to increase.
Brent crude futures, the worldwide benchmark for oil prices, were at $49.85 per barrel at 0020 GMT on Monday (8:20 p.m. ET on Sunday), up 75 cents, or 1.5 percent, from their last close. Surging US production has raised concern that OPEC and its partners are failing to reduce an oversupply.
But Javier Blas, reporter for Bloomberg News, thinks OPEC and its allies' comparatively rapid change of stance from initially saying no extension to the end of 2017 would be needed to pushing for extensions into 2018 indicates that "the fight between OPEC, Russia, and the US shale producers is intensifying, and so far it's America who is winning".
There's "renewed interest amid investors on the heels of Saudi Arabia's energy minister's comment", said Naeem Aslam, chief market analyst at brokers Think Markets UK in London. OPEC's original agreement on revised production levels was reached on November 30 past year and always subject to review in the normal way at the organization's next scheduled ministerial conference on May 25.
Given that there may have been a further shake-out of long positions following the sharp decline in prices over the second half of the last week, the market overall should be less vulnerable to further long liquidation. "OPEC members have no choice but to talk up prices by signalling an extension to the production cuts agreement".
USA oil production has risen more than 10 percent since mid-2016 to 9.3 million bpd, the highest since August 2015 and close to the levels of top producers Russian Federation and Saudi Arabia. Some analysts have concluded even a six-month extension would not be enough to bring stock levels down to their long-run average.
He also expected global oil demand to grow at a rate close to a year ago. "If that is the case then global inventories should fall about 1 million barrels a day in the second half of the year".