Published: Tue, March 21, 2017
Markets | By Erika Turner

Crude Oil Drops Near $48

Crude Oil Drops Near $48

The oil markets began the week on the back foot, with prices falling amid rising drilling activity in the United States as production from Opec countries remained steady.

U.S. West Texas Intermediate (WTI) crude futures were down 46 cents, or 0.94 percent, at $48.32 a barrel.

At the Multi Commodity Exchange, crude oil for delivery in March was trading down by Rs 31 or 0.97 per cent at Rs 3,165 per barrel in 3,406 lots. OPEC was also able to work out a deal with a consortium of non-OPEC producers such as Russian Federation and Venezuela to cut their production.

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.

As is invariably the case, the energy markets are exerting a strong pull on the broader economy as attention begins to turn away from the Federal Reserve and interest rates. At the same time, high inventories internationally have slowed new purchases, putting a downward pressure on prices.

"OPEC heavyweights such as Saudi Arabia are not happy with the return of shale oil in full force and have to make a hard choice between losing part of their market share or steady income", another source from a non-Gulf OPEC producer said. Weekly data from EIA shows that USA oil production is ~9.1 million bpd and latest EIA forecasts show that oil production could average 9.2 million bpd this year.

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Falih notes that OPEC is committed to cutting supply as much as necessary until there's an uptrend in oil prices.

OIL prices traded little changed last Thursday, as support from a weaker dollar was offset by a stubbornly high level of USA inventories near record highs that suggested Opec-led output cuts were starting to drain supplies.

In the seven days to 17 March, the sector saw 14 rigs added, bringing the total tally to 631, the highest level since September 2015. According to the most recent data, for January, inventories of crude and refined products stood 278 million barrels above this level.

As populist candidates and parties continue to perform well in elections across Europe and the US, the impact this shift will have on the workings of the world economy still remain unclear.

North Sea Ekofisk crude last week dropped to a 22-month-low against Dated Brent, a global benchmark that ultimately helps define the price of oil on the ICE Futures Europe exchange in London.

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