SK Innovation sees oil prices staying low, eyes USA crude

03 Juin, 2017, 15:36 | Author: Marc Bacque

Oil price is struggling to gain grounds despite the OPEC and N-OPEC agreement on production deals.

All dynamics are factored in: The IEA's growing outlook for global oil demand, the now confirmed OPEC and Russian production cuts, and a robust outlook for USA production growth.

Analysts at Rystad Energy are predicting USA crude oil output could top an old record set in November 1970 by the end of the year.

And Middle East grip on oil prices is set to weaken further amid tough measures from the U.S. led by Donald Trump.

Industry data on USA oil inventories from the American Petroleum Institute (API) late on May 31 was seen buoying prices. Still, analysts diverge on the future impact of the cut and whether the cartel and its non-OPEC counterparts have an effective exit strategy once they unwind the agreement that has taken 1.8 million barrels per day (mbd) off the market.

Analysts predict USA crude oil could rise even faster as prices increase.

Today's inventory report from US Energy Information Administration (EIA) will be released at 15:00 GMT.

A week ago, the OPEC and some non-OPEC members met in Vienna to roll over the output cut deal to reduce 1.8 million barrels per day (bpd) until the end of next March.

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Brent crude futures for July LCOc1 were up 39 cents, or 0.8 percent, at $51.15 a barrel by 0552 GMT, after trading higher earlier. It was the 20th straight weekly increase in the number of active USA oil rigs.

However, U.S. crude production is rising fast as new technology helps to extract shale oil, making the United States more self-sufficient in energy. It's above the three-year peak of 800,000 bpd hit in early May 2017.

According to the EIA, crude inventories in the USA market in the week to May 26 dropped by 6.4 million barrels per day to 509.9 million barrels, way more than the market forecast of a 4.4 million-barrel decline.

OPEC's decision to extend the same level of cuts for nine months rather than reducing production further could prove insufficient to draw out the surplus despite OPEC's strict compliance with the curbs.

WSJ's May analyst survey puts crude at an average of $56 a barrel this year, down a dollar from April survey.

The U.S. inventories data provided some relief after a week of negative news on the global supply-demand balance.

Rosneft, Russia's largest oil producer, has borne the brunt of output cuts under the extension deal.

Russian Federation is paying close attention to US oil production these days, and the CEO of the state-owned oil company Rosneft, Igor Sechin, publicly expressed concerns that surging American supplies could overcome petrostate efforts to cut production and push prices back up.

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