Russia's Rosneft Says Oil Production Cuts May Not Be Extended

Tammy Harvey
March 14, 2017

Prices dropped $2.81, or 5 percent, to $53.11 on Wednesday.

Traders should use the current fall in crude to accumulate long position in oil if prices rebound from the trendline.

US crude fell in early Asia on Monday with the market poised for a busy week of central bank policy reviews and reports from the Organization of Petroleum Exporting Counties and the International Energy Agency on global supply and demand levels.

The chart below is pretty epic in highlighting how US oil and product inventories remain a million miles away from the 2012-16 average, but just a smidge away from the record high set in the week ending February 10 at 1,359,941,000 barrels.

So the end of the first half of 2017 may not be time enough to cause the oversupply to dwindle, and OPEC may decide at its meeting in May to further tighten the market by extending the period of the supply cut.

Data from oilfield services provider Baker Hughes on Friday revealed that the number of active USA rigs drilling for oil rose by 8 last week, the eighth weekly increase in a row.

The Organization of the Petroleum Exporting Countries (OPEC) and shale producers have fought each other to a draw over the last two years, with neither able to achieve a decisive victory. "Money managers were becoming concerned about their net exposure and the lack of upward movement in price".

"With the market still digesting the big increase in inventories, oil prices are likely to remain under pressure today", ANZ bank said in a note. Production also increase by 56,000 barrels a day to 9.088 million barrels. That brought the total count to 617, the most since October 2015.

Saudi Arabia has made the largest cuts of the OPEC countries, and as the largest exporter in the world, the country tends to drive OPEC policy. The EIA said not only had U.S. stocks hit a record 528 million barrels of crude, but United States output had hit 9.088 million bpd and will continue rising well past 9.1 million.

There are severe civil and criminal penalties for sharing information about future output and prices let alone any attempt to divide market shares among producers ("The Antitrust Laws", Federal Trade Commission, undated). "For the market to establish the fact that it has finally hit bottom, we really have to get the price of oil back above $US50 a barrel, which is still a tall order at this point".

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