Crude rebound eases markets, stocks hit record high

Andrew Cummings
May 10, 2017

Oil prices have fallen, hitting their lowest levels since November a year ago, as volatile markets extended Thursday's near 5 per cent loss further over concerns of oversupply and fears of an emerging glut.

Rising U.S. production and stubbornly high inventories remain key drivers of the oil price, but equally important is the level of compliance among members of the Organization of the Petroleum Exporting Countries to their pledge to cut output by 1.2 million barrels per day.

USA production "continues to grow hand over fist, and the market will remain well oversupplied given the lack of" refined fuel demand, he added.

"At some point, the market should recognize OPEC isn't the most important player in the market any more", said Commerzbank's Eugen Weinberg, "That is non-OPEC, and, above all, US shale". July Brent crude (IFEU:LCON7) on London's ICE Futures exchange was up 3 cents at $48.41 a barrel, erasing a deep decline.

HONG KONG (AP) — Energy shares led declines on Asian stock markets Friday after oil prices fell to their lowest levels in almost six months on oversupply concerns.


Brent crude, the worldwide benchmark for oil, was trading at $48.54 per barrel on Friday, from over $50 only 24 hours ago.

Russia, which has contributed the largest production cut outside OPEC, said as of May 1, it had cut output by more than 300,000 bpd since hitting peak production in October.

Late a year ago, OPEC and top non-OPEC producers agreed to cut production to prop up falling oil prices.

"The forecast for non-OPEC supply in 2017 will also depend on how much USA tight oil production improves in the coming months", OPEC said in its April Bulletin.

The current rate of cuts, said Citi Futures analyst Tim Evans, is sufficient to result in demand outstripping global output by 1 million barrels a day in the second half of 2017 as seasonal demand picks up.


OPEC and non-OPEC oil producers look likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, three OPEC delegates said on Thursday, but they downplayed the chance of additional steps such as a bigger cut.

One of the main reasons for this is the persistent growth in USA oil output.

Over the weekend Reuters also reported Al-Falih had taken to Twitter to announce Brunei's energy minister Mohammad Yasmin Umar had expressed his nation's willingness to extend the oil reduction agreement, and "to support the stability of the oil market".

Even so, McGillian said, "We still have a near record overhang and signs of increasing production in areas of the world outside the producers that agreed to the cuts".

Russian Federation thinks it will be necessary to extend its agreement to cut oil output in conjunction with OPEC beyond June, Energy Minister Alexander Novak said in an emailed statement Thursday.


The oil slump comes just days after BP and Royal Dutch Shell (LSE: 0LN9.L - news) posted sharply improved profits following a recovery in the market in recent months.

Other reports by iNewsToday

FOLLOW OUR NEWSPAPER