dglobalnews.com Accumulator: oil price bounce marks end to torrid month
Published: Sat, May 13, 2017
Markets | By Armando Jensen

Accumulator: oil price bounce marks end to torrid month

Accumulator: oil price bounce marks end to torrid month

The increased production has undermined OPEC's efforts to keep prices between $50 and $60 per barrel.

Iran's oil output decreased by 34,700 barrels per day in April month-on-month to 3.759 million barrels per day (mb/d), OPEC reported May 11.

"Owing to the rapid recovery in US oil production, OPEC obviously only has limited influence on prices via supply curbs", it said, adding an extension "is unlikely to be more successful than the cuts implemented so far in the longer-term".

The U.S. Energy Information Administration said it expects American crude production to rise by more than expected in 2017 to 9.31 million barrels per day from 8.87 million barrels per day in 2016, a 440,000 bpd increase.

OPEC will also be mindful that US producers will likely expand output and take more market share away from the cartel the longer it curbs production, said Tom Pugh, a commodities economist at Capital Economics.

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To be sure, higher-cost producers have benefited from OPEC's supply cut.

As U.S. crude dipped below US$46 per barrel on Tuesday, Citibank says the "market is too complacent on price recovery". On January 1, an agreement reached in late 2016 came into force, with the objective of reducing supplies for six months, in a market in which low prices prevailed most of previous year. The U.S. surpassed both Saudi Arabia and Russian Federation in 2015 as the world's largest and fastest-growing producer of oil.

Norwegian consultancy Rystad Energy said "US oil production has gained significant momentum" and there was "limited downside risk in the short term". For a while, the strategy appeared to be working, with prices drifting north of $54 earlier this year.

But that could actually boost prices by creating pressure for OPEC to extend or even deepen its output cuts when members meet on May 25, brokers and analysts said.

The EIA has lso increased the forecast for petroleum supplies from non-OPEC countries. In particular, they would really appreciate it if the United States would stop producing so much damn oil...for the good of the world of course. Prices are back below $50 a barrel now and thanks to increased efficiency, USA producers can still make money at those prices.

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