Oil Prices Fall As OPEC Output Cut Extension Depresses The Market
Oil prices fell on Tuesday, pressured by concerns that production cuts by the world’s big exporters may not be enough to drain a global glut that has depressed the market for almost three years, as reported by REAUTERS.
Benchmark Brent crude LCOc1 was down 45 cents a barrel at $51.84 by 1000 GMT (6 a.m. ET), having gained 14 cents on Monday. U.S. light crude CLc1 was 25 cents lower at $49.55.
The Organization of the Petroleum Exporting Countries and other oil producers, including Russia, agreed last week to keep a tight rein on supply until the end of the first quarter of 2018, nine months longer than originally planned.
Collective output by OPEC and other producers will be held around 1.8 million barrels per day (bpd) below its level at the end of last year. But the cutbacks have yet to drain inventories significantly and prices fell after the OPEC deal was announced.
“Investors haven’t made up their minds if OPEC has done enough to balance supply and demand,” said Carsten Fritsch, senior commodities analyst at Commerzbank in Frankfurt. “Today’s losses follow gains yesterday, so overall oil prices have been rather flat this week.”
Part of the problem for OPEC is oil supply in the United States, where shale production is booming. U.S. drillers have added rigs for 19 straight weeks to reach 722, the highest since April 2015, according to services firm Baker Hughes (BHI.N).
Goldman Sachs analysts have reduced their forecasts for oil prices, saying that falling U.S. production costs will keep supply rising for years to come. The bank said that once OPEC’s production growth resumes after its self-imposed cuts, U.S. and OPEC output would rise by 1 million to 1.3 million bpd between 2018 and 2020.
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