Oil down on continued concerns over U.S. output

Mae Love
March 13, 2018

Brent crude futures were at $65.38 per barrel, down 11 cents, or 0.2 per cent, from their previous close.

US West Texas Intermediate (WTI) crude futures were at $61.91 a barrel at 0755 GMT, down 13 cents, or 0.2 per cent.

Futures in NY were little changed after surging 3.2 percent Friday. Gross short positions on the New York Mercantile Exchange climbed to their highest level in almost a month.

Both WTI and Brent as recently as Thursday had marked their lowest settlements since mid-February.

Crude oil prices reached $65 on Monday after a drop in prices earlier in the year.

"The big take away is the implied annual rate of change", James Williams, energy economist at WTRG Economics, told MarketWatch.

But the analyst seems to think this might be a fait accompli, because the OPEC deal is giving "market share to the U.S." via a surge in exports to the coveted Asian market, the traditional bastion of Middle East producers - and that this will encourage some nations to retaliate by boosting supply.

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Investors will then be anticipating OPEC's next move as concerns about USA production will likely dominate the oil cartel's June meeting in Vienna.

Williams also pointed out that based on the figures, USA shale plays this year will "add enough to US production to match all the oil Venezuela now produces".

Energy investors weighed increased US supply against the likelihood that the Organization of the Petroleum Exporting Countries (OPEC) will maintain supply cuts that have been in effect more than a year.

"From a fundamental standpoint, that is a material concern as the US oil industry alone could push the global market back into a surplus, which was the reason behind the 2014-2015 bear market in oil", he said in a daily newsletter. At stake is OPEC's production limits, which are among factors helping the oil market's monthslong recovery.

Oil prices fell on Monday on expectations that U.S. output will rise this year, erasing earlier gains due to lower weekly United States rig counts and falling USA unemployment. It was the first such decline in seven weeks. "We need to see prices in the short-term trade below $60 to reduce that incentive for USA producers", he said.

"The strong shale oil revival is starting to get more attention", said Bjarne Schieldrop, chief commodities analyst at SEB Markets.

For the record, the Islamic republic is allowed to pump up to 3.8 million barrels per day (bpd) under the cutback deal, and Zanganeh said his country could produce about 100,000 bpd more.

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