Crude oil prices are moving down because of the excessive production

  • Crude oil prices are moving down because of the excessive production

Crude oil prices are moving down because of the excessive production

Should the cuts be eased, as suggested by Iranian oil minister Bijan Zanganeh to the Wall Street Journal over the weekend, that would curb the profitability for shale producers, lowering shale output.

Oil markets climbed on Monday on the back of a drop in the number of United States rigs drilling for more production and as the U.S. economy continues to create jobs, which industry hopes will drive higher fuel demand.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished lower on Monday on renewed concerns over rising U.S. production and tight OPEC supply. The contract on Friday jumped over 3% to settle at $62.04 a barrel on the New York Mercantile Exchange, turning what would've been a weekly loss into a climb of roughly 1.3% from the week-ago settlement.

Brent crude futures LCOc1 were at $64.80 per barrel, down 15 cents, or 0.2 per cent.

The EIA is due to publish its latest weekly United States production data on Wednesday.

Scaring off traders betting on further price increases has been a relentless rise in US crude oil production, which soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.

OPEC has been reducing output by around 1.2 million barrels per day (bpd) since January 2017.

However, if predictions from Warren Patterson, a commodities strategist at ING Groep NV, prove accurate, Iran has nothing to worry about: because US activity is angering OPEC allies to the degree they will soon abandon the cartel's production cutback deal, pump all out, and drive prices back down again.

That has undercut some of the enthusiasm for oil, as investors weigh increased USA supply against the likelihood that the Organisation of the Petroleum Exporting Countries and non-Opec producers will maintain supply cuts that have been in effect for more than a year. "We need to see prices in the short-term trade below US$60 to reduce that incentive for USA producers", he said. Saudi Arabia, the de facto leader of the oil cartel, would like prices at $70 a barrel or higher, while Iran would like them closer to $60 a barrel.

Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in nearly two months. It was the first such decline in seven weeks. The most bullish scenario will be a weaker U.S. Dollar and higher equity prices.

April natural gas bucked the downtrend among its energy peers, settling up 1.7% at $2.778 per million British thermal units, with forecasts for more cold weather in the eastern US boosting expectations for heating demand.