Oil gains more than 1% on Middle East schism, tightening supply
- Author: Zachary Reyes Jun 12, 2017,
Jun 12, 2017, 16:15
The declines were good news for oil markets, where prices have trended lower recently over concerns that rising US production is offsetting output cuts by OPEC and other major producers and keeping global markets awash in oil.
Oil prices are down around 10 percent since the extension, and OPEC officials have since suggested they may deepen the cuts.
Oil prices dropped on Friday as investors acted in response to US President Donald Trump's decision of leaving from a global climate agreement which may lead to further crude drilling in the US therefore adding more to the global supply glut.
Oil prices are down some 9 percent since OPEC's May 25 decision to extend the cuts.
Crude stockpiles were down by 6.4 million barrels in the week to May 26, beating analyst expectations for a decrease of 2.5 million barrels.
U.S. West Texas Intermediate crude CLc1 futures fell 95 cents to $47.41 per barrel.
First, it was assumed that with the sharp drop in oil price back in 2015, there would be a sharp decline in production from countries like the United States, where it was estimated that the cost of producing shale oil is as high as $80-90 per barrel.
"A decrease in production under an agreement between OPEC and non-OPEC could largely be balanced out by an increase in US shale oil production by the middle of 2018", Rosneft Oil Co.
A week ago, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC members met in Vienna to roll over the output cut deal to reduce 1.8 million barrels per day (bpd) until the end of next March.
Surging U.S. production has put a strain on OPEC members' efforts to curb production to drain a global crude supply overhang.
Data from energy services company Baker Hughes showed on Friday that USA drillers last week added rigs for the 20th week in a row, the longest such streak on record, implying that further gains in domestic production are ahead. On Wednesday, they fell $1.53, or 3 percent, to settle at $50.31 a barrel on their last day as the front-month contract.
There is still considerable nervousness over the rise of American oil producers, which have doubled the number of rigs in operation over the past year.