"OPEC heavyweights such as Saudi Arabia are not happy with the return of shale oil in full force and have to make a hard choice between losing part of their market share or steady income", said a source from a major non-Gulf OPEC producer.
In the United States, West Texas Intermediate (WTI) crude futures were up 33 cents at $48.38 a barrel, after testing support at $47 a barrel overnight.
"Although OPEC's inability to balance the oil markets in the first half of 2017 has sparked speculations of the organisation extending its six-month contract, the rise of U.S. shale and lingering concerns of some members not fully following the compliance in cutting production could create headwinds". "Fracking has only just begun here in the USA and it will be transferred swiftly to other countries overseas, so the supply of crude oil is going to increase rather dramatically in the years to come", he told the Reuters Global Markets Forum on Friday.
Brent crude futures settled at $51.62 a barrel, down 14 cents.
"I think oil is reacting still to the steady rise in the USA rig count and the realisation that momentum is building to the downside from the repositioning of speculative interests in the market", said John Kilduff, partner at Again Capital in NY. Oilfield services provider Baker Hughes reported Friday that active USA oil rigs rose for a ninth straight week.
Even with murmurings about a possible extension to production cuts implemented by OPEC and non-OPEC members in the first half year, Dhar says that the risk to his average crude price of $US50-60 per barrel this year appear slanted to the downside due to the ongoing lift in U.S. supply.
On Tuesday, the American Petroleum Institute reported that United States inventories had climbed by 4,5 million barrels to 533,6 million last week, a bigger rise than the 2,8-million that analysts forecast.
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At present, the country has cut its production by 160,000 bpd and will have cut 200,000 by the end of March.
Total U.S. crude oil imports grew to 7.9 MMBPD in 2016, roughly 515,000 BPD higher than in 2015, as smaller price differences between global and domestic crude oils made importing more attractive in 2016 compared with the previous year. For the same period, analysts had estimated an increase of 2.1 million barrels in crude inventories, a decline of 2 million barrels in gasoline inventories and a drop of 1.7 million barrels in distillate stockpiles. Opec raised its 2017 Non-Opec oil supply growth forecast to 0.4 mbpd (prev. forecast 0.24 mbpd rise).
Attribute it to the luck of the Irish, the foolishness of speculators or perhaps some nations bucking the OPEC agreement to cut crude oil production.
USA shale oil producers have been adding rigs, pushing up the country's weekly oil production (C-OUT-T-EIA) to about 9.1 million bpd for the week ended March 10, up from an average of 8.9 million bpd for calendar 2016, according to US energy data. While the compliance to output cuts has been almost 100 per cent from the Opec side, relative non-compliance of Non-Opec coupled with steadily climbing U.S. production is keeping prices under pressure.
"The American Petroleum Institutes' crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels", said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.