IEA: Oil Investment Rising After 2-Year Lull
- Author: Zachary Reyes Mar 09, 2017,
Mar 09, 2017, 18:15
Oil prices attempted a slight rebound Thursday on the heels of plunging to their lowest levels in a year after weekly data which showed a higher-than-expected build-up in USA inventories.
Brent futures fell 29 cents, or 0.5 percent, to $55.63 after settling down 0.2 percent in the previous session.
Reuters reported that the plunge came as US inventories surge to record highs every week, fueling doubts about the effectiveness of the Organization of Petroleum Exporting Countries' strategy to curb production in order to deal with the global supply glut. U.S. West Texas Intermediate (WTI) crude was down by 0.6 percent or 29 cents to touch $52.85 a barrel.
The rise in prices on Thursday could be short-lived, according to Michael McCarthy, chief market strategist at Sydney's CMC Markets.
The March report also changes to the EIA's earlier estimates for crude oil and refined product pricing for 2017.
Oil prices were little changed on Tuesday, trading in a tight range as rising US shale output offset OPEC crude production cuts, with investors seeking clearer direction from upcoming inventory data and comments from senior oil officials.
The EIA expects OPEC members to produce 33.02 million b/d of oil in 1Q 2018, 33.30 million b/d in 2Q 2018, 33.29 million b/d in 3Q 2018 and 33.19 million b/d in 4Q 2018.
"In the same week, United States oil output crept higher, to 9.09mb/d [million barrels per day], and is now only 0.5mb/d below peaks reached in June 2015", he said, noting that "production was last at current levels in February 2016". Saudi Arabia sees crude inventories draining slower than expected and a decision to extend OPEC's deal to cut output will be made when ministers gather in May, the kingdom's energy minister said. While a rate hike would be supportive for the US dollar, analysts said a near-term hike was already largely priced in.
USA oil inventories are now at the highest level since weekly stockpile data started being recorded in 1982. Thus, OPEC countries are expected to reduce the average daily production by nearly 1.2 million barrels.
Since January, the Organization of the Petroleum Exporting Countries (OPEC) has lowered its production by 1.2 million barrels per day (mbpd) in a deal with non-OPEC nations. The deal also hinges on non-OPEC countries contributing an additional 600,000 barrels per day worth of cuts, with about half of that coming from Russian Federation.
"Conformity by all member countries is going to be a criteria", said Mr Falih, who added that some countries had yet to fulfil their pledges as part of the supply cut deal among global producers.