Oil price outlook grows more gloomy despite OPEC cut extension

U.S. West Texas Intermediate crude CLc1 futures dropped 45 cents, or 0.93 percent, to $47.91 per barrel.

U.S. President Donald Trump's withdrawal from the Paris agreement, the landmark 2015 global pact to fight climate change, drew condemnation from Washington's allies and many in the energy industry - and sparked fears that U.S.

Throughput was more than 1.2 million bpd higher than at the same point in 2016 and 2.2 million bpd above the 10-year seasonal average.

Jeffrey Halley, a senior market analyst at OANDA [Foreign exchange company] says that this could lead to a drilling free for all in the U.S.

Meanwhile, the head of Russia's largest oil producer, Rosneft, also expressed doubts that the OPEC cuts will revive oil prices in the long run.

US production hit 9.34 million bpd last week, highest since August 2015. OPEC output climbed in May, led by gains from Libya and Nigeria, countries that are exempt from supply cuts.

As a nervous and impatient market is forced to pick the victor between the 1.8 million b/d of OPEC/non-OPEC cuts in force until March 2018 and the rise in U.S. production underway, even before the full impact of either has been felt, trade has become increasingly sentiment-driven, with the view swinging to the bearish end in recent weeks.

Russia's Rosneft CEO Igor Sechin also said the market can not stabilize unless all producers cut output.

OPEC, in addition, discussed reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high.

There were fears that USA production output would increase further and also concerns that the United States action could lead to a weaker commitment to cutting fossil-fuel production in other countries.

Sentiment deteriorated further after data from industry group Baker Hughes on Friday showed USA oil drillers adding 11 more active rigs in the week ended June 2.

However, U.S. crude production rose to 9.34 million bpd last week, up almost 500,000 bpd from a year ago.

Reaction to the United States employment data could be significant for oil prices if the data is substantially away from consensus expectations of an increase around 180,000, although position adjustment into the weekend is likely to be a more important market factor. All this growth stems from shale drilling, as the more modest growth from Gulf of Mexico deepwater fields is offsetting declines from other USA conventional oilfields.

Even though the Organization of the Petroleum Exporting Countries and major non-cartel heavyweights such as Russian Federation last week extended the ongoing production cuts, it remains to be seen if such caps can effectively chip away the glut of oil that has haunted prices for more than two years.

  • Zachary Reyes