News Worms
News Worms

Oil Falls on Growing US Drilling Activity

Oil prices struggled near the lowest level since the end of November on Monday, as rising US shale production continued to feed concerns about a global supply glut. It showed that hedge funds decreased their net long positions in US WTI (West Texas Intermediate) crude oil contracts by 86,784 contracts to 288,774 contracts in the week ending March 14, 2017-compared to the previous week.

The value of long positions for Brent and West Texas Intermediate crude, the global and USA benchmarks, reached a combined US$56 billion on February 23, the highest since the Organization of Petroleum Exporting Countries announced the output cuts in late November.

The initial news about OPEC's planned cuts caused the price of Brent crude oil to soar from less than $4 per barrel to more than $52.

Following the lifting of sanctions imposed against Iran's nuclear program, business has been gradually returning to the country with many large oil companies importing crude oil of Iranian origin.

Producers and merchants increased their short positions, or bets on lower prices, to 739,736 futures and options during the report week, the highest level in a month. "They might need to reduce shipments more or extend this beyond June". Weekly data from EIA shows that U.S. oil production is ~9.1 million bpd and latest EIA forecasts show that oil production could average 9.2 million bpd this year. The deal was the first of its kind in eight years and included nearly a dozen outsider nations that agreed to cut an additional 600,000 barrels of production.

The first issue that has dragged oil prices down is that USA inventories have continued to rise year to date.

The number of active USA rigs drilling for oil rose for a ninth straight week-up 14 to 631 last week, according to data from Baker Hughes BHI, +1.39% released Friday.

Oil prices settled at their lowest level in almost a week, as another rise in active US oil rigs renewed concerns over domestic production and some analysts anxious that a change to the G-20 policy statement may impact global trade. OPEC's next meeting is billed to hold on May 25 in Vienna, Austria and analysts are already speculating on the possibility that OPEC will deepen its cuts above 1.2 million barrels or extend the cuts beyond six months.

Brent crude oil futures rose 0.02 dollar or 0.04 percent to close at USD 51.76 a barrel at NYMEX.


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