Published: Wed, April 19, 2017
Markets | By Erika Turner

Oil prices fall on expected continued increase in United States shale output

Oil prices fall on expected continued increase in United States shale output

"The last time the market had this level of certainty around long-term oil prices was before the rise in long-dated oil prices in 2003, almost 15 years ago", it said. "US producers are strong and are only going to get stronger".

The oil markets are caught in a puzzle.

Saudi Arabian Oil Co. was planning an 80-day maintenance work at its Riyadh refinery starting in late February to last through mid-May, according to two people with knowledge of the situation. However, IEA noted in the absence of OPEC extending its production cuts, the second half of the year could be more volatile due to a tighter USA supply and lower global oil demand.

On NYMEX (New York Mercantile Exchange) cost of the U.S. Light crude oil decreased $0.43 to stand at $52.75. As of 09:18 GMT today, the price is lower again by 0.46% to $52.42/b.

Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683.

In October past year, Shell resumed export of crude oil from the Forcados terminal following repairs, but the production wells were shut-in again due to the shutdown of the Trans Forcados Pipeline on November 9, 2016 as a result of sabotage on the 48-inch crude export line. Not even news that Iran is willing to join in the OPEC output deal if extended until the end of the year was enough to trigger a sustained oil rally as traders are focusing on the increase in United States oil rigs and stockpiles.

The minister also referred to production of gas in South Pars as one of the prioritized plans of the Oil Ministry in the current year. Explorers in Texas led the week's growth, with eight more rigs put to work in the Permian Basin in the western part of the state and in neighboring New Mexico, while three started up in the Eagle Ford of south Texas. If they don't extend the deal, the oil market may continue to be oversupplied and prices will fall.

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"The continued build in the US drilling rig count will weigh negatively on markets in the short term", said Edward Bell, commodities analyst at Dubai-based bank Emirates NBD PJSC.

Opec's oil output fell in March to sit below the level where the cartel estimates demand for its crude this year, as attempts to tighten the market were bolstered by supply disruptions in member countries.

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On Monday, the Energy Information Agency (EIA) said USA shale production in May was set for its biggest monthly increase in more than two years, adding to worries that these increases would undermine efforts of the world's top producers to rein in a glut.

".early indicators of first quarter of 2017 demand support this, with slowdowns seen in January in Japan, Germany, Korea and India".

The meeting in Vienna scheduled for May 25 will discuss whether the OPEC group will prolong the agreement for another six months.

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