Oil prices extend losses ahead of U.S. inventory data
31 January, 2018, 11:07 | Author: Teresa Adams
Brent crude futures were down 90 cents, or 1.3%, at $68.56 a barrel at 11:16 a.m. EST (1615 GMT) after touching a session low of $68.40.
A lot of analysts are continually putting their forecasts on par with the prices of the dollar as it comes up as an integral part of the oil prices' bullish surge.
While U.S. oil has risen more than 7% this year as OPEC trims supply to reduce a glut, speculation is increasing that the rally may encourage growth in American output, which is already at the highest level in more than three decades.
"The global trend seems to be indicating more oil is coming into the market despite best efforts by the Saudis and Russians to curtail output", said John Kilduff, partner at Again Capital LLC in NY. The majority of OPEC members agree that cuts should be maintained until the end of the year, Iraqi Oil Minister Jabbar Al-Luaibi said. Interestingly, since the announcement of OPEC supply cuts, the USA oil inventories have dropped by roughly 7.5% to 1,883 million barrels, in line with the OPEC's expectations.
"There are so many longs in the market that they're now taking profits".
A surplus, led by strong gains in North America and by the previous policy of the Organization of Petroleum Exporting Countries to defend a market share with robust production, pushed the price of oil below $30 per barrel in early 2016.
Meanwhile, the International Energy Agency said earlier this month that it expects US production to surpass that of Saudi Arabia, climbing above 10 million barrels a day in 2018. The greenback is set to fall 3 percent this month.
Although a surge in the USA oil production can not be ruled out, we believe that the U.S. shale producers have learned their lessons from the ongoing commodity slump and have become more conservative over the last three years.
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"The market is looking for clues of a shale rebound and the question is whether $70 is a price ceiling or whether we have more to run", he told UPI. Thus, we expect to see a steady yet moderate growth in the U.S. output over the coming months.
US bank JP Morgan said it had increased its 2018 average price forecast by $10 per barrel to $70 per barrel for Brent and by $10.70 per barrel for WTI to $65.63. "As such, the decline of the dollar helped push WTI and Brent to new multi-year highs this week".
The rise in both crude and product inventories is to be expected ahead of scheduled refinery maintenance planned for February and March, said Michael Poulsen, a senior oil risk manager at Global Risk Management. We present this scenario as blue bars, where the United States oil output is likely to surge at a much faster rate than predicted in our base case. As a result, we forecast gas prices to average at $3 per Mcf in 2018 and slowly grow to $3.40 per Mcf by 2021.
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