08 May, 2017
Oil prices were marooned near five-months lows on Friday after a near 5 percent fall in the previous session on concerns over rising US supply, wiping out all of the price gains since OPEC's move to curb output.
USA crude ended the session 4.81 percent lower at $45.52 per barrel after falling as much as 5.29 percent to an intraday bottom of $45.29, the lowest since November 29. Member nations of the Organization of the Petroleum Exporting Countries are due to discuss the deal later this month. Ultimately, the objective is to support prices. The benchmarks are trading around levels last seen before the joint deal to cut output was first announced.
"OPEC is going to continue the cuts". Brent crude will likely average $54.55 a barrel in the April to June period, little changed from the first-quarter average of $54.57 a barrel. The contract lost $2.30, or 4.8 percent, to settle at $45.52 a barrel on Thursday.
"There's an emerging consensus among participating countries on the need to extend the production agreement reached past year", Adeeb Al-Aama told Reuters.
That's put the ball back in OPEC's court.
Both Brent LCOc1 and U.S. CLc1 crude fell nearly 4 percent overnight on mounting concerns about oversupply. "Persistent growth in U.S. oil production. will also make extensions of the OPEC cap beyond 2017 unlikely". "Right now, it is all about supply and not demand".
The oil market's OPEC bounce has completely evaporated.
Tumbling prices would likely force OPEC members to extend production cuts later this month, but the prospect fo deeper cuts appeared slim, analysts said.
Renewed weakness in China, an expected hike in United States interest rates - which could make dollar-denominated oil more expensive to holders of other currencies - and signs of slowing demand have also contributed to the dive.
In currency markets, the US dollar hit its lowest level in roughly six months against the euro after the strong U.S.jobs data failed to shake investors' bullishness toward the euro ahead of the second round of France's presidential election.
"U.S. rig rates have now increased to levels that will allow production growth", said James Davis, upstream analyst at consultancy FGE.
Data released this week by the Energy Information Administration showed that US crude output rose by 28,000 barrels a day last week. US crude stocks stood at 527.8 million barrels, only 7 million barrels from a record high.
"It seems the frackers have more influence on pricing at this point than OPEC does", said CNBC contributor Anthony Grisanti, founder and president of GRZ Energy.
"It is now-or-never for oil bulls", said USA commodity analysis firm The Schork Report.
"While fracking has come back I don't see production from them increasing much more from these levels-banks won't finance those operations like they used to-and as the price falls some of those new wells become unprofitable once more".
Christopher Haines, head of Oil & Gas, BMI Research, also predicted US output may start levelling off.
But many in the market believe steeper cuts are needed to reduce the glut significantly.
Pierre Andurand, who runs one of the biggest hedge funds specialising in oil, liquidated his fund's last long positions in oil last week and is running a very reduced risk at the moment, a market source familiar with the development said.
