OPEC, shale seek a truce

Posted March 14, 2017

The Energy Information Administration said Thursday that the USA shale gains will be led by the Permian Basin, which should see output climb by 79,000 barrels per day.

Hedge funds trimmed their WTI net-long position, or the difference between bets on a price increase and wagers on a decline, by 2.9 percent in the week ended March 7, following a 6.5 percent drop the previous week, according to the CFTC.

Rosneft said the only guaranteed route to balance the market was for all producers to limit supplies, but acknowledged this would not happen because US shale producers would not join any such pact.

Fall in oil prices can be seen, as USA drillers added oil reserves for 8 consecutive week in order to look for oil in US, the biggest oil consumer in the world.

"Unless there are positive signs from non-OPEC producers on production cuts or there is a significant supply outage, the relentless pursuit of the USA shale production will cut into OPEC's plans", said Stuart Ive, a client manager at OM Financial, reports Market Watch.

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So the end of the first half of 2017 may not be time enough to cause the oversupply to dwindle, and OPEC may decide at its meeting in May to further tighten the market by extending the period of the supply cut.

Baker Hughes (BHI) reported that the United States crude oil rig count rose by eight to 617 rigs from March 3-10, 2017.

"With the market still digesting the big increase in inventories, oil prices are likely to remain under pressure today", ANZ bank said in a note. EIA expects drillers to raise production by 70,000 barrels a day in April. The nation's active oil-rig count has nearly doubled since May to 617 last week, according to Baker Hughes. Saudi Oil Minister Khalid Al-Falih said inventories haven't fallen as fast as OPEC had expected. Prices have fallen to the lowest level since before the OPEC deal was announced, as US inventories climbed to a new record high last week.

"We're going to be watching the rig counts pretty closely from now on", Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at U.S. Bank, which oversees $136 billion in assets, said by telephone.

Craig Erlam, senior market analyst at Oanda, added: "Of course, these changes take time to have an impact and non-Opec compliance is still a little low but with an extension to the deal in doubt, prices are reverting back towards pre-deal levels, although I doubt we'll get close to the lows any time soon".