Oil extends slide as record United States output sparks supply glut fears

REUTERS

So it seems this is really happening - the USA independent or nearly independent - of traditional oil producers like Venezuela, Nigeria and even Saudi Arabia by year's end - exporting to some of those place too - who'd have thought it possible just five or ten year's ago? In spite of prices stabilizing somewhat, there remains an uneasy calm as countries from OPEC (Organization of the Petroleum Exporting Countries) battle with shale producers in the United States for market share.

Oil fell for a third day on Tuesday as the USA dollar rose to its highest in more than a week in the wake of a sharp sell-off early this week on Wall Street and other stock markets. Let's look at them one by one and analyse how far the rally is likely to extend. Both figures are up 3.1 percent.

The 10-year U.S. Treasury yield rose to a high of 2.884 percent in morning trade, nearing Monday's four-year peak of 2.885 percent after the Bank of England said interest rates probably need to rise sooner than previously expected. That will reduce crude demand and push up oil inventories. After that, till early February 2018 the Brent crude oil price rose over $13 per barrel, and subsequently, the petrol and diesel prices were also up Rs 5 and Rs 7 per litre respectively.

The price for Brent crude oil was down 0.29 percent to $65.32 per barrel as of 9:20 a.m. EST.

Crude oil prices followed broader stock indices lower this week to break consistently in the mid $60 range.

Production cuts by OPEC.

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The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world.

"U.S. producers have reacted in style to the rising oil prices and have accelerated the pace of growth of USA crude oil production", said Mr. Jakob.

United States crude futures were stronger in post-settlement trading after weekly inventory figures from industry group the American Petroleum Institute showed a 1.1 million barrel decrease in overall crude oil stocks for last week.

Oil traded near the lowest closing price in two weeks as concerns about volatility in global markets offset an unexpected drop in USA inventories. With potentially huge reserves, the country's production and exports are having a direct influence on global prices, which had been largely the domain of the OPEC countries.

"But if we cut the gas, it does great harm to the UAE and the people of the UAE, who are considered like brothers. we decided not to cut the gas now", he added. The purchases of U.S. oil aren't likely to continue, given the UAE's own supply, Lipow said.

The flood of U.S. oil may even change the way crude is priced. Brent was heading for a weekly loss of almost 7 percent, its biggest since April, while WTI's weekly decline of almost 8 percent is the steepest since March. The crude and the refined products had to go somewhere, so the barrels went into storage. Crude prices that tested $26 the previous month reversed losses to top $50 in early June 2016. "Morgan Stanley falls in the middle, predicting that Brent will occasionally touch $70-75 in the first half of this year, stabilizing around $75 a barrel in the third quarter", according to OilPrice.com.

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