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14 May 2017, 09:37 | Virginia Santiago
In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.
With the specter of surging USA shale output evidently negating Organization of the Petroleum Exporting Countries (OPEC) efforts to reduce the global oil glut, sending crude prices last week under $50/bbl in the process, Saudi energy minister Khalid al-Falih Monday said he was confident the current oil output deal will be extended.
European benchmark North Sea Brent crude fell 1.8 percent to $47.49 a barrel in early morning trade on the Singapore trading platform on Friday, while U.S. crude dropped 2.1 percent to $44.58 a barrel.
CRUDE CONCERNS: U.S. benchmark crude futures fell under the key $45 level after tumbling almost 5 percent during U.S. trading. Other non-OPEC producers, including Russian Federation, joined the deal late past year, bringing expected cuts to about 1.8 million barrels a day.
Producers outside of OPEC picked up the pace, however, leading to oversupply issues like those that drove prices down on Thursday.
"Oil prices tumbled amid concerns over rising USA production despite the high probability that OPEC members will agree to extend production cuts when they meet on May 25th, although any likelihood of an increase in the level of cuts remains slim with OPEC officials playing down this possibility", said James Woods, global investment analyst at Rivkin Securities.
Some of the struggles of oil and the energy sector this year can be pinned on investors' concerns regarding the ability of major oil-producing nations, including the Organization of Petroleum Exporting Countries (OPEC), to effectively reduce production. The contract lost US$2.30, or 4.8 percent, to close at US$45.52 on Thursday.
"The market will get increasingly nervous as we approach late May, about the details (or not) of an extension to the OPEC production cut agreement". After weeks of oil failing to see substantial draws in US inventories, demand fears and technical pressures began to build.
The United States crude oil production is estimated to reach a 48 year high by 2018, USA oil rigs rose to a two-year high, U.S. inventories reaching near-record high, upcoming IPO of Saudi Aramco, increase in Libya's crude oil production, reports of Iran and Iraq increasing crude oil production to increase market share.
Goldman is referencing the current and future relationship between near-term and the long-term price of oil. The U.S. benchmark's 14-day relative strength index fell below 30 for a second day, signaling the commodity is oversold.
"The market will get increasingly nervous as we approach late May, about the details (or not) of an extension to the OPEC production cut agreement", reports Reuters. Prices fell to as low as $46.64, the lowest since November 30.
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