Oil prices were largely flat yesterday after steep losses the previous session, with rising US production weighing against comments from leading Gulf oil producers that an extension to Organisation of the Petroleum Exporting (Opec)-led supply cuts was likely.
Brent futures were at $52.93 a barrel, unchanged from their last close, while US crude futures were down at $50.50 a barrel.
“The US market perhaps doesn’t believe in the oil market balance that Opec would have us believe,” said Hans van Cleef, senior energy economist with ABN Amro.
Opec members Saudi Arabia and Kuwait said an effort by Opec countries and other producers, including Russia, to cut oil output was likely to be extended beyond June.
However, bloated inventories weighed. Despite a drop in US crude stocks last week, US crude oil production rose to 9.25m barrels per day, official data showed, up almost 10% since mid-2016. Patrick Pouyanne, the chief executive of French oil and gas giant Total, said prices could fall again by the end of the year due to a rapid rise in US shale production.
“The rebalancing in US crude stocks may have got under way, but concerns about further gasoline builds are rife even as the US summer driving season shifts up a gear,” said Stephen Brennock, an analyst with PVM Oil Associates. “With questions hanging over US gasoline demand, any further product builds will act as a brake on the oil price recovery.”
Darragh Crowley, energy trader at Bord Gáis Energy, said the direction of global oil prices remained highly uncertain.
“At the moment, Opec is curbing the oil supply, trying to boost prices and reduce the stockpiles of excess oil which have built up since 2014,” said Mr Crowley. “The stockpiles have not rebalanced as yet, because we have seen a pick-up in US shale oil production in response to the higher prices. This makes an extension of the Opec deal more likely, and may cause oil prices to rise if the market rebalances as Opec predicts that it will.”
“However, what we have seen so far is the increase in US production is negating or offsetting a lot of the Opec cuts.
“So, if we continue to see US production increase even further, this may actually cause oil prices to fall because the market could lose faith that Opec can really influence prices for any prolonged period.”
Reuters and Irish Examiner
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