OPEC Favors Production Cut Extensions As Next Meeting Nears

OPEC Favors Production Cut Extensions As Next Meeting Nears

Oil prices struggled near the lowest level since the end of November on Monday, as rising USA shale production continued to feed concerns about a global supply glut.

U.S. West Texas Intermediate and global Brent crude oil finished slightly better on Friday, but light volume held the market in a tight range.

Elsewhere, Brent oil for May delivery on the ICE Futures Exchange in London dipped 61 cents to $51.15 a barrel.

"This unwinding of position is both a cause and reflection of the big fall in crude oil prices when the cracks in the OPEC / non-OPEC deal emerged".

While few expected the Organization of Petroleum Exporting Countries and 11 other producers to eliminate a surplus overnight, the oil glut punishes bulls by dragging down futures markets that are ultimately anchored to physical price benchmarks. As reports about the strong compliance rates began to filter out in early 2017, prices moved even higher. "They might need to reduce shipments more or extend this beyond June".

The new lows come on the back of Friday's oil rig data from Baker Hughes, which said USA drillers added 14 rigs for a total of 631 last week, the most since September 2015. It also expects the cartel to maintain its agreed six-month production quota at around 32.5m barrels per day (bpd) for the rest of the year. As the week ended, Saudi Arabia and Russian Federation sent mixed messages on the future of the production cuts agreed to by the Organization of Petroleum Exporting Countries and 11 other nations. United States rig count has been increasing for nine consecutive weeks and latest forecasts show that USA shale output will continue to inch higher in April.

OPEC oil producers increasingly favour extending beyond June a pact on reducing crude supply to balance the market, sources within the group said, although Russian Federation and other non-members need to remain part of the initiative.

Bets on rising WTI crude during the report week were reduced by the most on record in data going back to 2006, the U.S. Commodity Futures Trading Commission announced Friday.

Saudi's demand for oil products declined to 1.959 million bpd in January to from 2.21 million bpd the month before. EIA forecasts show that U.S. shale oil production is expected to rise again in April by 109,000 bpd to 4.96 million bpd suggesting that shale is surely making a comeback at this level of oil prices.

Related News: