OPEC basket drops in price

Posted March 14, 2017

OPEC, along with some major non-cartel producers, pledged to cut about 1.8 million barrels a day from oil output levels during the first half of the year and the latest figures show that US oil production has the ability to offset much of that-potentially derailing the group's efforts to rebalance supply and demand world-wide.

A deal by the Organization of the Petroleum Exporting Countries with Russian Federation and other producers to rein in output by 1.8 million barrels per day (bpd) for six months from January 1 lifted prices but also encouraged USA firms to boost supplies.

More importantly, under USA law shale companies are forbidden from attempting to coordinate production and prices among themselves or with OPEC.

On the New York Mercantile Exchange, West Texas Intermediate crude for April dipped 0.87% to 0.$48.07 a barrel, while on the ICE Futures Exchange in London, Brent oil for May delivery was last quoted at $51.30 a barrel.

"Although Opec members may be commended on their attempt to stabilising the oil markets by cutting production, the fact that oil prices are nearly where they were when the initial production cut deal was announced is a major cause for concern".

The continuing weakness saw United States crude oil futures briefly dip under $US48 a barrel before struggling back above that level.

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The breakdown of the $50 a barrel level is not a good sign for Saudi Arabia and the OPEC.

Kuwait is scheduled to host a ministerial meeting on March 26 comprising both OPEC and non-OPEC members to review compliance with the output agreement and to discuss whether cuts would be extended beyond June.

Oil price fell more than 8 percent last week, the biggest one week decline in four months. USA drillers boosted the rig count by eight to 617 last week, according to data Friday from Baker Hughes.

Crude oil futures continued to slide on Monday, adding to the downwards move seen last week.

On Friday, oil-field services company Baker Hughes Inc. reported an addition of eight active oil rigs in the week ended March 3, and USA production has now surged past nine million barrels a day. Crude production rose to 9.09 million barrels a day, the highest since February 2016. Recently, both production and exports in the US have hit record highs of around 9 million barrels a day, respectively. "For the market to establish the fact that it has finally hit bottom, we really have to get the price of oil back above $US50 a barrel, which is still a tall order at this point".