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Oil Prices Fall, Focus Shifts to US Output

Oil Prices Fall, Focus Shifts to US OutputOil Prices Fall, Focus Shifts to US Output

Oil prices slipped on Friday, giving up gains from earlier in the day, as market shifted its focus towards production increases in the United States from efforts by OPEC and other producers to support prices by cutting supplies.

Brent crude, the international benchmark for oil prices, traded at $55.55 per barrel, down 69 cents from their last close. US West Texas Intermediate crude futures were at $53.30 a barrel, down 48 cents. US crude is poised to gain nearly 2% on the week, Reuters reported.

“The market is really torn between a relatively healthy compliance from OPEC and non-OPEC countries on the one side, and an increase in the US crude production on the other,” PVM Oil Associates analyst Tamas Varga said.

Prices had risen during Asian business hours, though activity was low due to the start of the Lunar New Year holiday in most countries of the region, including China and Singapore. The Organization of Petroleum Exporting Countries and other producers, including Russia, agreed to cut production by almost 1.8 million barrels per day for the first half of 2017 to fight a two-year supply overhang.

But US oil production has been rising, with the International Energy Agency forecasting total US production growth of 320,000 bpd in 2017 to an average of 12.8 million bpd. Market participants warned of more volatility ahead as speculators were reacting to even small developments in the physical markets.

“Given that speculative net long positions in Brent and WTI are already at a record-high level, the correction potential is therefore growing all the time,” Commerzbank analyst Carsten Fritsch said in a note.

 

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