Oil prices fall on expected climb in U.S. production
- Author: Zachary Reyes Apr 22, 2017,
Apr 22, 2017, 19:26
United States shale production in May was likely to post the biggest monthly gain in more than two years, government data showed on Monday, as producers stepped up the pace of drilling, with oil prices holding above $50 a barrel.
US crude oil production reached 9.24 million barrels per day (bpd), according to the latest Energy Information Administration data, making it the world's third-largest producer after Russian Federation and Saudi Arabia.
EIA reported crude oil stocks down 1 million barrels and total stocks down 1.1 million barrels from one year ago.
WTI (West Texas Intermediate) crude oil (XLE) (XOP) (USO) futures contracts for May delivery fell 3.8% and settled at $50.44 per barrel on April 19, 2017.
All oil producers taking part in a supply-cut pact are committed to bringing global inventories down to the industry's five year average and restoring stability to the market.
Since the start of the year, oil prices have risen roughly around 20% after OPEC and other heavyweights such as Russian Federation agreed to slash their output by almost 1.8 million barrels a day.
Oil prices regained some ground on Thursday after steep losses the previous day, with a slight drop in US crude inventories stoking hopes that a global supply overhang might slowly retreat.
"The only negative number in the report is the gasoline build", Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. US WTI crude futures rose 1 cent to $52.66 a barrel. Oil prices will increase as demand improves, chipping away at oil inventories in the second half, he said. While compliance has been strong among OPEC countries, production cuts have lagged among others that have agreed to act to curb oil prices, including Russian Federation.
Iran will probably be allowed to keep production unchanged if OPEC decides to extend its limits beyond the first half of the year, Kuwaiti Oil Minister Issam Almarzooq said in an interview in Abu Dhabi, the U.A.E. capital. However, he noted it was too early to discuss whether they planned to extend the six-month production deal that was implemented in January.
Opec's compliance with the cuts improved to 104 per cent in March from 90 per cent in February, while the rate for non-Opec producers in the deal increased to 64 per cent from 38 per cent over the same two months, the International Energy Agency said in an April 13 report.