Oil Prices Fall After US Output Rises

Oil Prices Fall After US Output Rises

Oil Prices Fall After US Output Rises

According to Russia's Energy Ministry, in 2017 the demand for oil grew by 1.5 million barrels a day, which was more than experts had forecasted.

Following the report, most analysts now expect output would breach the 10 million bpd mark soon.

South Korea's crude oil imports from the United States showed a significant increase past year.

The global oil glut is shrinking and the monetary tightening expected in 2018 isn't likely to have a considerable impact on the oil market, particularly in an environment of improving economic growth, OPEC said Thursday.

The IEA was the latest energy body to lift its estimates for output in 2018 after it said: "This year promises to be a record-setting one for the USA". In November 2017, the oil producers agreed to extend the deal for the entire year of 2018. Oman's Minister of Oil and Gas, Mohammed bin Hamad Al Rumhy noted that among the factors contributing to these results was oil production cuts in such countries as Venezuela and Mexico.

The IEA, which advises advanced market economies on energy policy, said that there was 95% compliance by OPEC countries with the agreed cuts.

For the longest time, the Organization of Petroleum Exporting Countries (OPEC) held the position of a swing producer in the global oil markets, implying that the cartel could manipulate its oil output to suit the market situation due to their low cost of production.

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Crude oil prices hit a fresh three-year high and rose past the psychologically important $70-a-barrel mark on Tuesday. In the past such agreements have tended to amount to little as Opec members have often cheated on production quotas to maximise revenues. The next meeting of the joint ministerial committee overseeing implementation of the cuts will be held in April in Saudi Arabia, an OPEC statement said.

At the current oil price level, the forward curve is well above marginal costs across regions which could lead to a gradual increase in producer hedging and drilling activity, Goldman said. With the extension of the OPEC production cuts until the end of this year, the market anticipates a further rise in the United States output in the coming months. At the current level of inventories, it will take some time for the U.S. shale producers to flood the markets and create a similar oil glut in the coming quarters.

The main price driver has been a production cut by a group of major oil producers around the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation, who started to withhold output in January previous year.

ANZ bank said "an upcoming soft patch in demand and extreme investor positioning does open up the possibility of some short-term weakness".

The chart pattern suggests crude oil prices should remain under pressure for 2 to 3 weeks.

"With a framework of cooperation now developed and in place, and with the mandate and direction provided by the "Declaration of Cooperation", producers now have the tools and the mechanisms to act more quickly and effectively in the case of future market imbalances, which history shows are bound to arise again in the oil industry".

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