Oil prices fall as US output soars above 10 million bpd

Eileen GuzmanFeb 10, 2018

Crude oil prices yesterday were close to their lowest levels this year with soaring United States, US, output undermining Organization of Petroleum Exporting Countries, OPEC's efforts to tighten markets and prop up prices.

The relative performance of the S&P energy index has generally tracked oil prices, but a gap emerged in 2017 as crude prices recovered but shares in energy companies lagged, indicating they are primed to catch up. American crude in storage increased by 1.9 million barrels.

US West Texas Intermediate (WTI) crude futures were at $63.46 a barrel, down 69 cents, or 1.1 per cent, from their last settlement and more than $3 off their 2018 high.

Also impacting crude oil rates is the impending refinery maintenance season in many markets, during which refineries temporarily suspended operations, depressing demand for crude oil. Brent crude was trading at $65.05 per barrel at 10:40 GMT, down 52 cents, or 0.7 percent.

Goldman Sachs raised its 2018 oil price forecasts, projecting that Brent crude will soon top $80, fueled by blockbuster oil demand, a deal among big producers to limit output and U.

We will remind, the global energy Agency warned that the United States is prepared "explosive" growth of oil production.

But Mr Jaafar Altaie, managing director of Manaar Energy Consulting said there are still persistent downward threats to the price from the rise in the U.S. shale oil production and weak compliance among Opec members.

Even with Wall Street stocks posting their largest one-day fall since late 2011 on Monday and measures of volatility spiking to multi-year highs, reflecting heightened investor nervousness, oil has not suffered to the same extent.

Output for USA oil is poised to climb above 10 million barrels a day, which would top a record set in 1970 and cement the status of the United States as the No. 2 producer in the world.

Weighing further on prices was that USA commercial crude stocks rose by 1.9 million barrels in the week to February 2, to 420.25 million barrels.

In addition, the US Energy Information Administration said on Wednesday that US crude stockpiles rose by 1.9 million barrels last week. This is the first USA cargo to be shipped to the Middle East.

Traders who divine market momentum from charting and technical signals were closely watching NY crude's 50-day moving average, because a settlement below that level for several days in a row would be regarded as bearish.

"The idea that it is back up and running normally, combined with the data that show US production is rising, contributes to the overall idea that USA production could offset cuts by OPEC", said McGillian.

Oil prices fell to two-month lows on Friday after data this week indicated USA production hit record levels, raising concerns the market will become oversupplied. As China has built up inventories of strategic petroleum reserves, China's crude oil imports have increased faster than their domestic consumption. Both factors are likely to drive up global supplies.

Iran has indicated it intends to increase oil production in the next four years, but the country's oil minister, Bijan Namdar Zanganeh told reporters this week that his country could quickly add 100,000 barrels a day extra if OPEC and non-OPEC conclude the production cut agreement.

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