Published: Thu, March 15, 2018
World | By Melba Underwood

Saudi Arabia Signals Commitment to Oil-Production Cuts

Saudi Arabia Signals Commitment to Oil-Production Cuts

U.S. crude futures initially tumbled after the U.S. Energy Information Administration reported that inventories of crude oil rose by 5 million barrels - double what analysts surveyed by The Wall Street Journal had anticipated, and significantly more than the 1.2 million-barrel build reported by industry group the American Petroleum Institute on Tuesday.

There is a split between Saudi Arabia and Iran on the ideal oil price.

A multitude of factors were weighing on oil prices, but one factor stands out among the rest, and that's the steadfast climb of USA crude oil production, which for the week ending March 2 increased again, coming in at 10.369 million bpd-close to the 10.7 million bpd figure that the EIA suspects we will see in 2018.

Brent crude oil futures were down 18 cents to $64.46 per barrel by 12:45 p.m. EST (1645 GMT), while U.S. West Texas Intermediate (WTI) futures were down 9 cents at $60.62 per barrel.

Analysts forecast that stockpiles of gasoline fell 1.2 million barrels last week.

"The ever-expanding US supply continues to pose significant downside risk to oil prices", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA.

Moody's said oil prices have firmed since OPEC's November 2016 agreement to cut oil production by 1.2 million barrels per day (bpd), while non-OPEC members, led by Russian Federation, agreed to cut production by 558,000 bpd.

More news: Craig Mack Latest News, Photos, and Videos

The weekly oil release follows news of an uptick in US shale deals.

US crude oil production has risen by nearly a quarter since mid-2016 and output soared past 10 million bpd in late 2017, overtaking production by top exporter Saudi Arabia.

Earlier Wednesday, OPEC projected that USA and other non-OPEC supply growth will outpace global demand growth in 2018, raising the risk of imbalance in the oil markets and lower crude prices. But the group said total global oil supply rose last month, in a sign that US shale production is undermining Saudi efforts to rebalance the market.

Longer term, the International Energy Agency expects USA shale to cover 80% of the additional oil demand the world will see through 2020 and 60% by 2023, as Permian production doubles.

Oil futures for April delivery have slipped below the May contract in recent days, which could be a bearish signal that discourages more investment.

-Summer Said and Christopher Alessi contributed to this article.

Like this: