Iran says supports extending oil output cuts

Paterniano Del Favero
Aprile 20, 2017

Oil dropped to the lowest in more than a week on signs USA output is rebounding, undermining OPEC's efforts to clear a global glut.

Futures fell as much as 1 per cent in NY, paring last week's 1.8 per cent advance.

The latest Energy Information Administration (EIA) inventories data will be released later on Wednesday with expectations of a small draw still intact following the API data. However, Citi analysts pointed to the landmark deal between OPEC and its allies as reason for investors to be optimistic that this could offset the increased levels of US drilling activity over the next six to nine months. While shale oil will fill part of that void in the global oil market, it will not replace rising demand and OPEC cuts. While U.S. crude stockpiles declined from a record, OPEC said in a report Wednesday that rivals in the American shale industry are growing stronger. Opec will decide at its meeting on May 25 whether to prolong the cuts it began making in January, he said. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers. "The reality of rising United States output and massive inventories are weighing on prices".

Hedge funds boosted bets on higher West Texas Intermediate crude prices a second week as futures topped $53 a barrel for the first time in a month, US Commodity Futures Trading Commission data show. Their intraday low was $52.10, also the weakest since April 7.

But, according to Curt Taylor, president of Opportune LLP's Ralph E. Davis Associates, the average productivity of a rig in the Permian before April 2009 was less than 100 barrels a day.

Benchmark Brent crude futures were down four USA cents at $55,32 at 6.49am GMT.

But the 1.5 million barrel increase in gasoline stockpiles raised fears of a potential repeat of previous year, when a glut of gasoline caused refiners to go on a diet, cutting their purchases of crude and sending oil prices lower. Distillate stockpiles fell a bit more than expected-down 2 million barrels last week.

Any increase in output in the USA, now the world's third-biggest oil producer, was likely to put pressure on oil cartel Opec - which agreed to curb output at the end of 2016 - to cut production further. Goldman Sachs Group Inc. has called for the market to be patient. Iran pumped just shy of its 3.8 million barrels a day allowed under the deal in the first quarter, according to the International Energy Agency.

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