Published: Tue, March 21, 2017
Economy | By Annette Adams

Crude Oil Drops Near $48

Crude Oil Drops Near $48

Last week, both Brent and WTI crude oil traded in a $2.50 range as investors weighed the impact of the first oil cut from OPEC in eight years against rising USA shale oil output and high inventories. May Brent crude LCOK7, -0.14% gave up 14 cents, or 0.3%, to $51.62 a barrel on the ICE Futures exchange in London.

"While producers remain confident the Organisation of the Petroleum Exporting Countries' (Opec) measures to curb output will bring the market into balance, price action suggests traders aren't buying it", said Craig Erlam, analyst at Oanda.

Baker Hughes reported that in the week leading up to 17 March, US shale companies added 14 oil rigs, increasing the number of operating rigs to 631, the most since September 2015.

Saudi Arabia's crude oil exports in January fell to 7.713 million bpd from 8.014 million bpd in December, according to data from the Joint Organizations Data Initiative (JODI).

The non-Opec part of global supply is the bigger worry for the market at the moment. This indicates the USA shale oil industry, hit by low energy prices, is returning to the market.

At a Vienna meeting in May, OPEC will decide on whether to ditch, continue or widen production cuts.

Based on the latest monthly report by OPEC, Iran has increased crude oil production to 3.814 bpd in February from an average of 3.725 bpd in the fourth quarter of 2016, when the deal was reached.

A kind of price supporting factor at the moment is Libya, where oil output has allegedly dropped by about 80,000 barrels a day since clashes broke out.

April natural gas traded at $3.009 per million British thermal units, up 6.1 cents, or 2%. The Libyan government regained control of two key oil ports, Es Sider and Ras Lanuf, which can export up to 600,000 barrels per day.

Shale oil production could rise more than expected if oil hits US$70 to US$80 a barrel, International Energy Agency executive director Fatih Birol said in a Bloomberg television interview. Members which agreed to the production freeze and cuts were able to reduce production from 29.9 million to 29.7 million bpd. For the second half, the situation will be much more dependent on what OPEC and some non-OPEC nations made a decision to do.

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