Oil drops on rising USA drilling
- Author: Zachary Reyes Mar 21, 2017,
Mar 21, 2017, 7:57
Oil prices fell with already-bloated markets pressured by rising U.S. drilling activity and steady supplies from Organisation of the Petroleum Exporting Countries (Opec) countries despite touted production cuts.
As of 8am GMT (4 pm Singapore time), prices for benchmark Brent crude futures were down 34 cents, or 0.66 per cent, at US$51.42 (S$72) per barrel.
US West Texas Intermediate (WTI) crude futures were down 46 cents, or 0.94%, at $48.32 a barrel.
The number of active USA rigs drilling for oil rose for a ninth straight week-up 14 to 631 last week, according to data from Baker Hughes (http://www.marketwatch.com/story/baker-hughes-data-show-us-oil-rig-count-up-a-ninth-straight-week-2017-03-17)(BHI) released Friday. "We expect OPEC to maintain the agreed production quota at around 32.5 million barrels a day for the rest of the year".
A possible extension of OPEC's crude oil production cut deal in 2H17 could support oil prices.
Is It the Beginning of a Bear Market for Crude Oil? An 8-9% slide in Brent and WTI crude futures since March 6, if sustained or extended, could also threaten discipline within OPEC and its 11 non-OPEC to adhere to their pledged cuts, prompting further sell-off.
WTI crude has "found itself vulnerable to heavy losses.as the rising drilling activity in the USA reinforced the oversupply fears", said Lukman Otunuga, research analyst at FXTM, in a note. Oil production in the USA has risen to above 9.1 million barrels of oil per day (bpd), from 8.5 million bpd in June 2016.
The increase in output from USA shale oil producers has practically negated the expected effects of OPEC's production cut.
On March 17, 2017, the CFTC (U.S. Commodity Futures Trading Commission) released its weekly Commitments of Traders report.
Data last week from oilfield services company Baker Hughes showed an increase in the number of rigs deployed in the United States for the ninth week in a row.
"While oil prices are expected to recover towards the end of the year, they will remain in the $50-$60 band given the high level of stocks which will combine to put a cap on the price".
"We don't think a renewed crash in oil prices would have as large an effect on the world economy as it did in 2015-16", said Capital Economic's economist Simon MacAdam.