Oil slides as U.S. climate withdrawal compounds glut concerns

  • Oil slides as U.S. climate withdrawal compounds glut concerns

Oil slides as U.S. climate withdrawal compounds glut concerns

"A decrease in production under an agreement between OPEC and non-OPEC could largely be balanced out by an increase in USA shale oil production by the middle of 2018", Sechin said. Sechin, a close ally of President Vladimir Putin, expects shale oil output to increase by about 1.5 million barrels a day in 2018, close to the entire cut targeted by OPEC and its allies.

OPEC has a self-imposed goal of bringing inventories in industrialized countries down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

But the announcement was drowned out by a report of a recovery in oil output in Libya.

Traders said that prices had received support from a tightening physical crude market.

Rising output from OPEC members, Nigeria and Libya, which were exempted from the output reduction deal, is also undercutting attempts to limit production. Armed conflicts and other turmoil have taken a heavy toll on the two countries' oil industries.

The greatest challenge facing price stability is so-called US shale output, which in recent years has put the U.S.in the worlds top three producers with Saudi Arabia and Russian Federation.

Including Nigeria and Libya, OPEC oil output remained about 450,000 barrels a day higher than the target specified in the November 30 production deal, placing the group's progress to only around 66 percent toward its goal compared to last month's 90 percent. Since then it's stabilized, and rebounded to 9.1 million barrels a day in March, the most recent month stats are available for.

Oil futures rose on Thursday from a three-week low touched the previous session, buoyed by expectations the United States could pull out of a global climate accord and by a report that showed USA crude stockpiles had fallen more than expected.

Oil rebounded from the lowest close in more than two weeks after industry data showed USA crude stockpiles extended declines, easing an inventory overhang.

But cheaper oil down the line is an unacceptable proposition for Saudi Arabia, which is looking to list shares in its state-run Saudi Arabian Oil, or Saudi Aramco, in 2018. Meetings could not be arranged, sides could not agree on certain positions, so oil prices continued to drop.

Furthermore, oil producers are considering hedging as a strategy to lock in desired crude oil prices. OPEC has become the swing producer of the world because other producers have figured out how to lower their costs and increase their efficiency and get more oil out of the ground profitably at $50. It is not investment advice or a solution to buy or sell securities.

The chart above represents Brent crude oil prices, which seemed to honour the OPEC deal intentions, until April. American oil explorers, having learned to operate more efficiently during a two-year market slump, have restored nearly all the output lost during the downturn.

"Based on proprietary and detailed well level data, Rystad Energy sees current USA production bouncing back twice as fast as it dropped", the firm wrote in a report this week.