Oil prices pause after sharp falls

Patrice Gainsbourg
Junho 20, 2017

They are down more than 12 per cent from late May when producers led by the Organisation of the Petroleum Exporting Countries extended a pledge to cut output by 1.8 million barrels per day (bpd) through March 2018. Also, a Bloomberg report predicted continued high oil prices, and disruption of gas supplies from Qatar is not expected.

Traders said the main factor driving prices lower was a steady rise in us production undermining the OPEC-led effort. LCOc1 on Brent crude futures had fallen 18 cents, a total of a 0.4% reduction, putting the oil price at 0659 GMT to US$47.19 per barrel.

OPEC crude oil output rose 290,000 b/d in May to 32.08 million b/d-the highest level so far this year-after comebacks in Libya and Nigeria, which are exempt from supply cuts.

Although the market may be subject to periodic short-covering rallies, the overall theme is bearish. OPEC's move could have backfired as the oil inventories have remained high in the US. Data on Friday showed a record 22nd consecutive week of increases in the number of US oil rigs, bringing the count to 747, the most since April 2015.

USA production is expected to continue rising along with other non-OPEC producers in 2018, outpacing the expected demand increase.

Three years ago, crude oil was selling for $100 a barrel which was continuing to make gulf oil countries richer by the day.

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In light of all the variables surrounding Global oil markets, the expectation of fixed prices of oil is not right, because it is affected by major worldwide conflicts, and the issue of oil shale is adding some pressure too. Higher crude oil prices in mid-2017 may raise US supply in 2018.

USA energy companies added oil rigs for a record 22nd week in a row, energy services company Baker Hughes said yesterday. The agency's first look at 2018 suggested that US crude production will increase 780,000 b/d year-over-year, but "such is the dynamism of this extraordinary, very diverse industry it is possible that growth will be faster".

Of the 8m barrels a day imported into the United States last week, Saudi Arabia probably supplied about 1m barrels a day, said Kilduff, adding that it could come down by 100,000 to 250,000 barrels a day. This means that even if OPEC continues to lower production, it will take some time to completely offset the oversupply of oil.

In the week ahead, market participants will eye fresh weekly information on USA stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world's largest oil consumer.

Talking about the future of oil, many economists have pointed out that in the next 10 years, oil-producing countries will face more economic problems if they do not expand their investments and diversify their sources of income. The figures given vary, but most was said about the excess supply in the amount of 1-1,5 million barrels. a day.

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