Finance

Oil prices fall as United States output rise outweighs stock falls By

Oil prices fall as United States output rise outweighs stock falls By

Jeffrey Halley, market strategist at futures brokerage Oanda in Singapore, said crude futures had been at "overbought levels for an extended period as record speculative longs built on the futures markets".

Crude futures have climbed to highs not seen since the early days of a slump in December 2014, prompting some analysts to suggest the recent price rally could hasten the process of OPEC devising an exit strategy.

Oil prices edged down Thursday, as investors mainly digested the release of USA inventory figures. The February contract expires at Monday's settlement.

In London, Brent crude for March delivery - the global oil benchmark, fell 70 cents, or 1%, to end at $US68.61 a barrel.

Based on our estimates, we expect Brent oil prices to average at around $65 per barrel in 2018 and gradually increase to $90 per barrel by 2024.

In recent years, America's unprecedented oil and gas boom has been driven by one factor above all others - and that's shale.

OPEC said US shale producers lowered breakeven costs between 2015 and 2017 but now service companies are raising rig and labor costs so breakeven prices are rising.

Saudi Arabia will be overtaken by the United States as the world's leading energy producer in the next twelve months according to the latest monthly report from the International Energy Agency (IEA).

Most analysts expect US output to break through 10 million barrels per day soon. Its stance late previous year threatened to splinter support for extending the oil production cuts until the end of 2018.

According to the National Bureau of Statistics, it's the first time annual growth has improved in seven years.

The production cuts, introduced by OPEC and 10 non-member oil producers, have reportedly become the major price driver.

But lurking in the background is rising non-OPEC production - which was acknowledged last week by the producer group.

Oil "demand expectations are strong with the growing global economy, and the OPEC deal continues to have a positive effect on sentiment", and "technically speaking, the trend remains bullish [for oil] as futures are sitting just under multiyear highs", said analysts at the Sevens Report.

OPEC economists in their monthly market report for January said the United States is the clear leader when it comes to adding more barrels, with an increase of 62,000 barrels per day a year ago. In November, it was reported that OPEC production fell for a fourth straight month. Production growth is expected to be mainly in Iran and Saudi Arabia.

The agency previously said U.S. output could reach 10 million b/d in February and 11 million b/d by late 2019.

The IEA predicts a "wave of new production" from the U.S., which could unsettle the market and be a big hit for oil-producing states such as Saudi Arabia who might have believed they were on the road to recovery.

"Additionally, global crude oil markets saw an exceptionally tight fourth quarter in 2017 as the large draw in OECD crude stocks coincided with a decline in Chinese implied crude balances".

Total output rose by 42,000 bpd to 32.42 million bpd, led by a gain in Nigeria which along with Libya was exempted from the supply cut because unrest had curbed their production.

In the United States, crude inventories fell 6.9 million barrels in the week to January 12, to 412.65 million barrels.


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