Oil prices dropped in the United States on Monday 20 March 2017 as the growing concerns regarding oil output and high inventories rock the United States. The prices are dropping even though OPEC supported the extension of the six month deal to reduce output and investors worries continue to climb nationwide.
The production cuts are expected to continue into the second half of 2017, according to the Organisation of Petroleum Exporting Countries. Even with this, Benchmark Brent crude did increase, but soon dropped down again. This is a concern across the country for investors who are hoping for a positive outcome moving forward.
Over the past ten days there has been an increase followed by a quick decrease, a constant pattern which has emerged after speculators exited their positions with very high inventory figures. Crude has made a number of attempts to bounce back after the ten percent decline seen a week and a half ago, but the increases have been very short before it drops again.
It’s the analysts that are saying that speculative investors are the ones that are going to continue reducing positions with US producers increasing drilling activities and keeping the industry optimistic about the future, but this is expected to change as OPEC continues to try and reduce supply on a national scale.
Again Capital in New York has advised that the oil is responding to the rise in rig counts and that the momentum is continuing to build on the downside based on the speculative interests in the oil market. This can be seen by the more than one hundred and fifty thousand contracts which were cut last week which relied on Brent and US oil prices becoming firmer. This is a new record.
US drilling data has confirmed that higher production should be expected as fourteen oil rigs were added making the total rigs six hundred and thirty one. This happened in the week up to 17 March 2017 and the most rigs in use since September 2015. This was confirmed by an energy services company, Baker Hughes.
The US West Texas Intermediate crude prices regained from their losses, but remained down by forty three cents offering a price of $48.35 per barrel, but Brent only dropped by nine cents a barrel to $51.67 per barrel. This was recorded at 11.53am EDT on Monday 20 March 2017.
The deal between the OPEC and other producers is concerned about their effectiveness as US production continues to rise. This could result in further decreases in pricing moving forward and production levels increasing as a result.
With the increase in non-OPEC supplies, analysts at JP Morgan were forced to make the decision to cuts their 2017 and 2018 pricing forecasts for Brent and West Texas Intermediate. The forecast included West Texas Intermediate dropping from $53.75 to $53.50 and Brent dropping from $55.75 to $55.30.
OPEC has basically dug themselves into a hole and this could result in them needing an extension. It could result in further increases as producers become more vigorous than the existing model that we have in front of us right now.
An OPEC kingpin in Saudi Arabia was working to the output cut pledges, yet official data has revealed that the crude exports had fallen by around three hundred thousand bpd in January 2017. This is a growing concern which must be monitored closely as prices continue to rise and fall as a result, which could lead to further cuts in the future.