Oil ends lower as rising USA rig count, G-20 statement unnerves
- Author: Leroy Wright Mar 21, 2017,
Mar 21, 2017, 5:06
At the Multi Commodity Exchange, crude oil for delivery in March was trading down by Rs 31 or 0.97 per cent at Rs 3,165 per barrel in 3,406 lots. The U.S. benchmark for the price of oil, West Texas Intermediate, was off 1.7 percent from the previous close to $47.94 per barrel.
Crude oil is trading lower on Monday as concerns over the increasing US oil output offset OPEC's effort on production reduction.
According to the data by the National Iranian Oil Company (NIOC), Iran supplies Europe with 500,000 barrels of crude oil per day.
According to traders, the oil prices have been squeezed by rising USA drilling activity, in addition to supplies from OPEC countries despite their previous comments on cutting crude oil production by 1.8 million barrels per day, in association with Russian Federation.
Yet so far the cutback has not had the desired effect as compliance by involved exporters is patchy and as other producers, including the United States, have stepped up to fill the gap, resulting in crude prices falling more than 10 percent since the beginning of the year. Nevertheless, some analysts are hoping that the full outcome of OPEC's production cuts haven't been seen yet and that despite the increase in US production OPEC's cuts will show effect in April, as demand from refineries increases. However, if OPEC doesn't extend its deal, it could pressure crude oil prices.
Finally, dollar-denominated crude oil prices extended their gains after the U.S. Federal Reserve raised interest rates in a highly expected move, but drove the U.S. Dollar sharply lower against a basket of currencies after the Fed's monetary policy statement and economic projections were less-hawkish than expected.
USA drillers boosted the rig count for a 9 straight week by 14 to 631 last week, data from Baker Hughes showed on Friday.
"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".
Traders also said that healthy oil demand would help rebalance markets and support prices.
U.S. oil output has risen to over 9.1 million bpd from below 8.5 million bpd in June past year.