Watch out OPEC, US could break oil production record of 1970

by Ben Pena June 10, 2017, 7:08

South Korea's SK Innovation, which owns South Korea's top refiner SK Energy, said on Tuesday it expects US shale output to keep oil prices low, and is looking for opportunities to bring in USA crude oil.

A ideal storm of geopolitical and market issues put the $50 per barrel floor for crude oil prices under threat early in the Wednesday session.

The Organisation of the Petroleum Exporting Countries (Opec) and other producers, including Russian Federation, agreed last week to extend a deal to cut production by about 1.8 million barrels per day (bpd) until the end of March 2018.

"News that Libyan production is continuing to grow at levels last seen over three years ago, threatens the prospect that, with rising United States output, the OPEC cuts will become nearly meaningless".

The Organization of the Petroleum Exporting Countries (OPEC) and non-members are committed to reducing global oil inventories to a five-year average, said Saudi Energy Minister Khalid Al-Falih in Moscow on Wednesday.

Industry data on USA oil inventories from the American Petroleum Institute (API) late on May 31 was seen buoying prices.

U.S. West Texas Intermediate crude futures fell 84 cents to $47.54 per barrel. Production fell about 1 million barrels per day over the next year and a half as oil prices collapsed.

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Last week 22 OPEC and non-OPEC nations agreed to extend crude oil production cuts - previously announced in November 2016 - for an additional nine months, sidelining 1.8% of total global supply until the end of March 2018. Brent crude futures for July were up 40 cents at $51.16 a barrel by 0245 GMT.

Production was now at 794,000 bpd, the NOC said on Wednesday.

Rising output from Nigeria and Libya, which are exempted from the deal, is also undercutting oil producers' attempt to limit production.

FXTM vice president of market research, Jameel Ahmad, said: "I maintain the viewpoint that the mindset of investors will remain tilted towards sell-on rally opportunities and I think traders are likely to continue entering selling positions around $50 as they have done for a number of months".

USA drillers have so far added rigs for 19 straight weeks and the market was waiting for this week's data from service company Baker Hughes after 1 p.m.to see if they have extended the year-long recovery.

"Greater OPEC restraint will help to shore up prices, but we do not expect it to be enough to push prices above $55 per barrel on average in 2017-18", said Cailin Birch, an analyst at the Economist Intelligence Unit. Brent traded near $49 a barrel on the ICE Futures Europe exchange in London on Friday.

According to the EIA, crude inventories in the US 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.


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