US Oil Export Surge Threatens OPEC Strategy

  • US Oil Export Surge Threatens OPEC Strategy

US Oil Export Surge Threatens OPEC Strategy

ING's outlook is in contrast to bullish views from Royal Bank of Canada and Goldman Sachs Group BMI Research and Societe Generale SA, which see prices supported as strong demand soaks up supply from the U.S. While Patterson does see healthy oil consumption, he said growth may slow and fail to completely absorb gaining American output.

Signs of strength in the United States economy and data showing American explorers curtailed drilling activity is helping oil hold gains after its biggest jump in seven months.

After the U.S. boosted rigs drilling for oil for six straight weeks, American explorers idled four rigs last week, easing fears over surging shale production.

Bloomberg quoted an ING analyst yesterday as saying that crude could fall below US$60 a barrel because of rising USA exports to Asia, a key market for every producer. The U.S. benchmark gained $1.92 to $62.04 on Friday. Explorers idled four oil rigs in the US, bringing the total to 796, Baker Hughesdata released Fridayshowed.

Brent crude, the global oil benchmark, fell 0.5% to $65.11 a barrel on London's ICE Futures exchange. The Dow Jones Industrial Average .DJI fell 157.13 points, or 0.62 percent, to 25,178.61, the S&P 500 .SPX lost 3.55 points, or 0.13 percent, to 2,783.02 and the Nasdaq Composite .IXIC added 27.52 points, or 0.36 percent, to 7,588.33.

Friday's strong US payroll data, which showed a hefty 313,000 rise in jobs but tempered growth in hourly earnings, supported Treasuries in early trade.

Williams also pointed out that based on the figures, USA shale plays this year will "add enough to US production to match all the oil Venezuela now produces".

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 risks sliding back under $60 a barrel as a surge in US shipments to Asia threatens to undermine a deal between OPEC and its allies, according to ING Groep NV. The resulting fallout could drag down crude prices after a rally of more than 40 percent since June, he said.

"The price level can not have been the reason: prices in excess of $60/b continue to make drilling for (shale) oil attractive, as the expenditure plans of the oil companies suggest", Commerzbank said.

"Nothing really stood out", said Goncalves, head of USA rates strategy at Nomura Securities International in New York."You can consider that a good thing, given this year will see more and more Treasuries issued".