Oil prices slide below $45 per barrel
- Author: Zachary Reyes May 17, 2017,
May 17, 2017, 23:40
Crude plunged to a six-month low, erasing gains sparked by OPEC's November output agreement, as concerns over a supply glut mounted.
Brent futures were up US$1.20, or 2.5 per cent, at US$49.58 a barrel by 11:02 a.m. EDT, while US West Texas Intermediate crude was up US$1.09, or 2.4 per cent, at US$46.61 per barrel. In Part 4, we'll see why U.S. crude oil inventories fell.
The markets, however, viewed the report as negative and crude oil prices dropped close to the trendline support at $47 per barrel.
Prior to the landmark deal, the volume of production in the country was at the level of 37.72 million tons of oil, while daily output stood at 829,100 barrels.
The moves are likely to add even further pressure on OPEC members as they prepare for their next meeting on May 25 in Vienna, when they are expected to discuss extending a late-November agreement on production cuts that has, along with participation from Russian Federation, taken 1.8 million barrels of crude from the market each day.
But ABN Amro warned that Opec may not expand the agreement, as oil prices gained less than expected in the first quarter this year and have triggered higher United States crude output.
Roberto Friedlander, head of energy trading at Seaport Global Securities, pointed to "terrible" demand for refined products, uncertainty around future oil consumption and "what seems like an endless supply of oil".
Ibe Kachikwu, Nigerian petroleum minister says although OPEC is likely to prolong curbs for a further six months although American shale supply remains a concern.
"The jobs report is extremely positive for the U.S. economy.and should help boost oil demand", said Mark Watkins, regional investment manager for U.S. Bank's private client group in Park City, Utah.
Renewed weakness in China, an expected hike in USA interest rates - which could make dollar-denominated oil more expensive to holders of other currencies - and signs of slowing demand have also contributed to the dive.
He added that further reduction of oil production is unlikely to be discussed at the meeting because the countries which joined of the OPEC agreement intend to maintain the market share, while other oil producers which have not joined the agreement are close on their heels.
"We still think the market does rebalance by the end of this year as long as OPEC continues its production cuts", Amrita Sen, chief oil analyst at the London-based consultant, said in a Bloomberg television interview. The culprit: crude prices that tumbled from London to NY as traders abandoned faith in an OPEC-led effort to use supply cuts to counteract a persistent shale-fed glut.
But many in the market believe steeper cuts are needed to reduce the glut significantly.
There are also increased doubts over OPEC compliance with countries liable to exceed production quotas.
US crude output rose by 28,000 barrels a day last week for the longest run of gains since 2012, according to EIA data.
"At some point, the market should recognize OPEC isn't the most important player in the market any more".