Oil Falls as Concern Grows over Battle of OPEC vs U.S. Shale
NEW YORK, May 9 (Reuters) - Oil prices fell on Tuesday, rattled by concern over slowing demand, a rising U.S. dollar and increasing U.S. crude output that has shaken investors' faith in the ability of OPEC to rebalance the market.
Brent futures lost 61 cents, or 1.2 percent, to settle at $48.73 a barrel, while U.S. West Texas Intermediate crude fell 55 cents, or 1.2 percent, to $45.88.
That was the lowest close for both futures since May 4 and the second lowest since Nov. 29 - the day before the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production during the first half of 2017.
The U.S. dollar, meanwhile, gained 1 percent against a basket of currencies so far this week as it rose to its highest since April 21, pressuring greenback-denominated oil.
Weekly U.S. data on crude production and inventories, plus monthly reports on supply and demand from OPEC and the U.S. Energy Information Administration (EIA) this week, should provide a more detailed picture of how quickly global crude inventories are falling.
Analysts forecast U.S. crude stocks declined for a fifth week in a row, falling 1.8 million barrels during the week ended May 5, since hitting an all-time high over 535.5 million barrels at the end of March, according to a Reuters poll.
"We really need to see some of the data starting to support the idea that global inventory levels are coming down," Saxo Bank senior manager Ole Hansen said, noting there have also been signs of wavering in terms of demand growth.
High U.S. gasoline stocks have fed concern about demand in the United States, where consumer spending expectations hit a three-year low last month and vehicle sales have fallen year-on-year for four months in a row.
Coupled with that is faltering manufacturing activity and a drop in commodity imports in China, the world's second-largest economy and biggest raw materials consumer.
Top oil exporter Saudi Arabia said Monday it would "do whatever it takes" to rebalance a market that has been dogged by oversupply for over two years.
Saudi Aramco will curb oil supplies to Asia by about 7 million barrels in June, a source with direct knowledge of the matter said.
"Although OPEC is apparently putting on a renewed push to support values, this looks like the only significant bullish consideration currently available to the energy complex," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Even though OPEC has stuck to its pledge to cut production, U.S. output <C-OUT-T-EIA> has risen by more than 10 percent since mid-2016 to 9.3 million barrels per day in 2017 and a forecast all-time annual high of almost 10 million barrels in 2018, boosted by the shale sector and near the output of Russia and Saudi Arabia.
"U.S. oil production surpassed expectations in terms of an early bottoming and swift uptick, and is set to expand further based on the latest drilling momentum," said Norbert Ruecker, head of macro and commodity research at Julius Baer.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds