OPEC vs. US Oil

Crude Oil Breaks Key Support Heading ‘Due South”

Rigs targeting crude in the US rose to the most since September 2015, according to Baker Hughes.

Crude oil futures continued to slide on Monday, adding to the downwards move seen last week.

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

Oil steadied below $49 a barrel as USA drillers continued to boost activity, countering OPEC's efforts to drain a global glut.

Oil prices have been trading in a narrow $5 range around the low-to-mid-$50s over the past three months as sentiment in oil markets has been torn between rising stockpiles and increased shale production in the US and hopes that oversupply may be curbed by output cuts announced by major global producers.




Oil prices were put under further pressure at the end of last week, when energy services firm Baker Hughes reported USA drillers added oil rigs for the eight consecutive week. The contract lost $2.86, or 5.4 percent, to $50.28 on Wednesday, the biggest decline in percentage terms since February 2016.

Fund managers still held an overwhelming bullish position at the end of March 7, with long positions outnumbering shorts by a ratio of 7:1 (http://tmsnrt.rs/2nloC76). "That should make [the Organization of the Petroleum Exporting Countries] nervous".

"There are significant risks the (OPEC-led) deal won't be extended partially because of the main participants, but also because of the output dynamics in the United States, which will not want to join any deals in the foreseeable future". As for crude inventories on their own, they are up 49.4mn bbls, or 800,000 bpd: last quarter's drop is being completely offset by the rise in US crude inventories so far this year.

"It was Saudi Arabia which initiated the pricing war in the first place with the aim of radically increasing its market share by squeezing out producers of "costly" oil", Rosneft said, in a reference to shale producers. Saudi Oil Minister Khalid Al-Falih said inventories haven't fallen as fast as OPEC had expected. That brought the total count to 617, the most since October 2015. The nation's crude output has climbed to 9.09 million barrels a day, according to data from the Energy Information Administration.

Speculators had built record long positions on the hopes that the OPEC production cut will balance the market. A weaker U.S. Dollar could soften the landing, however. "For the market to establish the fact that it has finally hit bottom, we really have to get the price of oil back above $US50 a barrel, which is still a tall order at this point".

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