Oil Trades Near $53 After US Crude Supplies Climb to Record

Don't Hold Your Breath For $70 Oil Prices

USA crude futures were recently unchanged at $53.20 a barrel on the New York Mercantile Exchange. "If production cuts are coming through as suggested, we should see oil prices push higher", ANZ bank said on Monday.

Oil prices continue to slip in Asian trade, being affected by a stronger dollar and higher than expected growth in United States oil inventories.

Has the market become range bound?

13 de febrero de 2017, 12:04London, Feb 13 (Prensa Latina) Oil prices dropped today before the rise in extraction of USA platforms, dealing a blow on the OPEC agreement and of nations outside the entity to reduce global inventories.

USA dollar surged strongly to the highest level over last three weeks after Yellen's optimistic comments related to the interest rate hike, and as history has it, a stronger dollar makes oil prices more costly for consumers using various currencies. As per the U.S government data, U.S shale production is all set to increase to its highest levels in five months.

Oil prices and the dollar are typically in an inverse correlation. "A floor is being formed by the production reduction agreed by OPEC and several non-OPEC oil producers. But lessons from the past have made the market deeply suspicious", van Cleef at ABN said.

Crude Oil trading at $ 52.88 is unlikely to trade below $50 per barrel.




The International Energy Agency (IEA) said last week that the initial rate of compliance with a landmark deal to reduce the global oil glut was 90 percent. The market has largely priced in these production cuts OPEC and other producers agreed to in November, said Tariq Zahir, managing member of Tyche Capital in NY.

Victor Shum, VP of IHS Energy Insight, highlighted the inherent self-interest of the Organization of the Petroleum Exporting Countries' (OPEC) output reduction agreement - and the danger it poses to the global market - on Tuesday by noting that if oil prices falter, cartel members who are now earning vigorous praise for their high compliance will resume pumping, thus causing the opposite of what the agreement was supposed to do: reduce oversupply and bring about market re-balance.

- Among the OPEC members who have committed to production quotas, total output in January was 29.9 million bbl/day. And, out of the total 558,000 barrels per day, Russian Federation had agreed to reduce its production by 300,000 barrels per day in a gradual manner. Russian Federation has reduced some 100,000bpd in the month of January.

US oil production has been rising, and held steady at just under 9 million barrels a day last week. OPEC's forecast for 2017 is down slightly from the 1.3 million bpd estimated for 2016, during which oil demand in OECD Europe, OECD Asia Pacific and other Asia was "better-than-expected" due to increased demand in the petrochemical and transportation sectors.

The durability of the deal, then, may depend on how long Saudi Arabia, which has historically played the market's "swing producer" role to help keep the market balanced, will be amenable to covering for any members not hitting their target.

I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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