Oil prices stable after two-day decline, but rising US output drags

Jon Howard
March 14, 2018

"The U.S. economy getting better means oil demand will be stronger".

Futures fell 1.1%, and April futures slipped below May contracts.

"Permian and Bakken shale basins still saw active oil rigs rising by two and three last week, respectively and are likely to keep USA oil production on increasing trend", ING said.

Wood Mackenzie Ltd. last week forecast that US crude shipments overseas will soar to nearly 4 million bpd by the mid-2020s, rivaling shipments from Iraq and Canada; and as far as Patterson is concerned, the Middle East won't give up Asia easily.

Oil has struggled to recover losses from last month's broader market slump after topping $66/bbl in January.

The Organisation of the Petroleum Exporting Countries (Opec), with a group of other producers led by Russian Federation, has been withholding production since the start of 2017 to prop up prices.

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The reduction came as gross short positions on the New York Mercantile Exchange climbed to their highest level in almost a month. The global benchmark widened to a $3.89 premium to May WTI.

The most significant price action this week is likely to take place after the release of the American Petroleum Institute's weekly inventories report on Tuesday and Wednesday's U.S. Energy Information Administration report. The Permian Basin is seen leading the way with an 80,000-barrel increase. Total American output has passed 10 MMbopd, beating a record set in 1970.

That expected increase would top the 105 000 bpd climb in March from the previous month, to what was then expected to be a record high of 6.82 million bpd, the EIA said.

Signs of strength in the USA economy and data showing American explorers curtailed drilling activity is helping oil hold gains after its biggest jump in seven months. Meanwhile, stockpiles at Cushing, Oklahoma, the delivery point for WTI futures, are forecast to have been little changed after 11 straight weeks of declines.

"Oil prices moved lower. after (the) Energy Information Administration published a report that crude production from seven major US shale plays is expected to see a climb", said Stephen Innes who is head of trading for Asia/Pacific at futures brokerage OANDA in Singapore. Workers at Libya's Zawiya oil-export terminal started a strike on Monday over delayed salary payments, according to people with knowledge of the matter.

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