Oil Prices Pressured by Growing US Crude Supplies

OPEC's compliance with output cuts high rebalancing progresses Goldman

US oil futures traded as high as $48.68 a barrel earlier in the session. That rose for a 9th week by 8 to 617 rigs last week, almost 60% above the level of a year ago. "However, the key to market performance this week is the response to the USA lift in rates".

Optimism about an agreement between the Organization of Petroleum Exporting Countries and some non-OPEC producers to cut output is fizzling as stockpiles continue to climb and USA drilling rigs are returning at the fastest rate since 2012.

"Unless there are positive signs from non-OPEC producers on production cuts or there is a significant supply outage, the relentless pursuit of the US shale production will cut into OPEC's plans", said Stuart Ive, a client manager at OM Financial, reports Market Watch.

United States drillers boosted the rig count by eight to 617 last week, according to data Friday from Baker Hughes.

Fund managers still held an overwhelming bullish position at the end of March 7, with long positions outnumbering shorts by a ratio of 7:1 (http://tmsnrt.rs/2nloC76).

"The data from the last two reports suggests they were getting nervous", Tim Evans, an energy analyst at Citi Futures Perspective in NY, said in a telephone interview. OPEC is said to be prepared to extend the deal, and may also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters.


The kingdom, the world's biggest oil exporter, had long refused to cut output under veteran oil minister Ali al-Naimi.

Shale billionaire Harold Hamm said his industry could "kill" the oil market if companies keep increasing spending to boost drilling.

According to the EIA, the amount of crude oil in USA storage reached another record high the week-ending March 3, jumping 8.2 million barrels. Crude production rose to 9.09 million barrels a day, the highest since February 2016. That brought the total count to 617, the most since October 2015.

The EIA (U.S. Energy Information Administration) will release its monthly Drilling Productivity report on March 13, 2017.

Craig Erlam, senior market analyst at Oanda, added: "Of course, these changes take time to have an impact and non-Opec compliance is still a little low but with an extension to the deal in doubt, prices are reverting back towards pre-deal levels, although I doubt we'll get close to the lows any time soon".

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