Oil falls 1 percent as bullish bets fade with USA output rise
21 March 2017, 12:55 | Austin Hogan
Opec greases the wheels of US shale boom
The nation's crude output has climbed to 9.1 million barrels a day, the most since February past year, according to the Energy Information Administration.
The initial news about OPEC's planned cuts caused the price of Brent crude oil to soar from less than $4 per barrel to more than $52.
Benchmark Brent crude futures were down 60 cents at US$51.16 a barrel. Estimates of the compliance rate vary, but OPEC says that the parties to the recent agreement implemented 94% of their pledged production cuts by February.
With the evolution of shale oil technologies, shale oil production break-even price seems to be going even lower, paving the way for production to be increased as crude oil prices rally. Analysts were expecting inventories to rise by 3.7 million barrels.
Saudi Arabia is the only member that reduced output by more than the agreed numbers, according to Opec figures (130,000 barrels a day cut above its agreed production), while Russian Federation is at nearly at a third (118,000 barrels a day compared with the agreed 300,000 barrels a day).
Birol noted that "we will see a major boom of a second wave of USA shale production" this year and OPEC in considering extending its reduction initiative needs to take this into consideration: because if an extension results in higher prices, this will merely cause the Americans to pump even more. Some OPEC members-Iraq, Libya, and Nigeria-have increased their production since October. The average daily oil production of Bashneft halved in March versus October to 29,100 tonnes.
However, domestic production began to stabilize as oil prices approached the $50-per-barrel mark previous year.
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In 2016, the first full year with no restrictions on exports of domestically produced crude oil, US crude oil exports averaged 520,000 b/d, 55,000 b/d (12%) higher than in 2015.
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"These tight oil producers are the new swing producers, so every time OPEC tries to influence prices by cutting production you see the tight oil market step in which is why we have an upside limit". Oil demand will also continue to rise this year and in the next few years, he said.
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