Crude Oil Steady Near USD48 Ahead Of OPEC Meeting

Andrew Cummings
March 24, 2017

Benchmark Brent crude oil settled at $50.56 a barrel, down 8 cents on the day.

The move by the Saudis may be a weak attempt to spike prices higher.

Oil prices dipped on Thursday, stuck near four-month lows because of investor concerns that OPEC-led supply cuts were not yet reducing record USA crude inventories.

OPEC has broadly met its commitments to reduce output, but non-OPEC producers have yet to fully deliver on pledged cuts and USA shale oil producers have been pumping more oil after crude prices recovered from last year's drop below $30.

The US Energy Information Administration (EIA) said on Wednesday that the country's crude inventories climbed by nearly 5 million barrels to 533.1 million last week, far outpacing forecasts for an increase of 2.8 million, Xinhua news agency reported.

The Saudi Arabia is expected to cut its exports to the United States entering March; the decrease of barrels per day will reach the 300,000 cap.

According to the U.S. Energy Information Administration's data, the United States alone imported as much as 1.3 million barrels per day from some of the OPEC's top exporter last February.

"OPEC's goal of drawing down inventories to normal levels is not going to be reached before their agreement expires on June 30", U.S. investment bank Jefferies said in a note to clients.

Overnight, crude futures settled lower on Thursday, as investors continued to fret about growing US crude inventories to record levels. "A lot of the negativity has been priced in", said Olivier Jakob, MD of PetroMatrix. Many US energy small-caps typically rent the land under their oilrigs, and the extended period of low oil prices has affected their financial situation, where they were forced to drill and pump oil in order to keep their lease, even though oil extraction entailed pure financial losses for them.

When the OPEC started cutting the barrels per day production of its major countries, Saudi Arabia has topped the largest production cut after the agreement. This would mean the Saudis would have to cut their supplies to the USA to an even greater extent, focusing on their Asian and European partners instead.

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