Oil Prices Slide As Trump's Paris Decision Compounds Glut Concerns
- Author: Zachary Reyes Jun 06, 2017,
Jun 06, 2017, 16:11
USA shale drillers pose a challenge to the OPEC-Russia agreement because they can fill the supply shortfall by the middle of next year, Rosneft Oil Co.
The Forcados export terminal was shut down in February 2016 following militant attacks and Shell Petroleum Development Company of Nigeria declared a force majeure on exports of the grade.
That is because crude production in the United States, which is not participating in the cuts, has jumped by over 10 percent since mid-2016 to 9.34 million bpd, close to levels by top producers Saudi Arabia and Russian Federation.
Brent crude futures settled at $49.95 per barrel, down 68 cents or 1.3 percent, while U.S. West Texas Intermediate crude futures fell 70 cents to settle at $47.66 per barrel or 1.5 percent.
That has the market really concerned and each weekly rise in the number of active rigs in use in the USA adds to the concern and pressures on prices.
"Unless something extreme happens, we are not going to get back to much higher", IHS Markit Ltd. vice-chairman Daniel Yergin, author of the definitive history of the oil industry, said in an interview at the conference on Friday.
"It's sort of unprecedented agreement", said Dudley.
According to the EIA, crude inventories in the USA market in the week to May 26 dropped by 6.4 million barrels per day to 509.9 million barrels, way more than the market forecast of a 4.4 million-barrel decline.
This could be compounded by President Trump's decision to exit from the global pact to address climate change.
Commodity markets were absorbing news the United States would withdraw from the landmark 2015 global agreement to fight climate change, a move that fulfilled a major campaign pledge but drew condemnation from US allies.
He also expressed fear that other producers could do the same.
"As these numbers are getting confirmed, the initial optimism about OPEC's temporary cuts, may turn to increasing skepticism about OPEC's choice of policy once the current output deal expires next year", says Bjørnar Tonhaugen, VP Oil Markets at Rystad Energy.
US exports of petroleum products rose to 4.9 million bbl/d, and on average, exports are up more than 31% year-over-year.
Despite this, Brent futures are still more than 8 per cent below their level on May 25, when OPEC announced it would extend its production cut into 2018.
Faced with lingering glut woes, the oil cartel also discussed last week reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, according to sources.