Oil falls after failed North Korean missile test, US rig count gains

Jon Howard
April 18, 2017

TOKYO, April 17 Crude oil futures fell slightly in quiet trading on Monday, after a three-day Easter break, as investors digested a third consecutive weekly gain in prices along with North Korea's failed missile launch on Sunday.

Brent for June settlement dropped as much as US58¢, or 1 per cent, to US$55.31 a barrel on the London-based ICE Futures Europe exchange. On Thursday, before the break closed most major markets, they settled up 3 cents at $55.89 a barrel.

U.S. West Texas Intermediate (WTI) crude futures likewise retreated 47 cents at $52.71 per barrel.

Crude oil declined Monday, but consolidated well off session lows as investors evaluated signs of higher US output. On the other hand, the United Arab Emirates will reduce output by 139,000 barrels a day, Kuwait by 131,000 barrels a day and non-OPEC member Russian Federation will cut by as much as 300,000 barrels per day. We now expect that USA production will be 680,000 b/d higher at the end of the year than it was at the end of 2016, an upgrade to our previous forecast.

Oil prices swelled to the highest levels since March 1.

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"All the signs of an ever-growing bull market are starting to fade away, (with) Libya and geo-political tensions easing, but also because the Texans are back and they are pumping like there's no tomorrow", said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai. Iran fed hopes that OPEC and non-OPEC producers would extend the cuts, but Saudi Arabia's energy minister said it was too early to discuss an extension.

The US drill rig count climbed to 683 last week, the highest since April 2015 and a 13th week of gains, Baker Hughes data showed on Friday.

Investors should also look out for important data such as the weekly United States crude inventories figures, to gain further insights into the pace of the oil market rebalancing.

USA crude oil production reached 9.24 million barrels per day (bpd), according to the latest Energy Information Administration data, making it the world's third-largest producer after Russian Federation and Saudi Arabia.

Indeed, although the oil market will likely tighten throughout the year, overall non-Opec production, not just in the USA, will soon be on the rise again. Meanwhile, crude throughput, or the amount of crude that goes into a refinery before it comes out processed, rose 4.5% on-year to 11.25 million barrels a day in the same period.

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