High oil prices over OPEC supply cut: Prices may come down as shale drilling booms in US

High oil prices over OPEC supply cut: Prices may come down as shale drilling booms in US

There are limits to investors’ love affair with OPEC.

After unprecedented optimism that the Organization of Petroleum Exporting Countries will manage to ease a global supply glut, money managers reduced their bets on rising West Texas Intermediate prices for the first time in a month. While the group and other major exporters are pumping less crude, U.S. inventories and production are on the rise, and shale drillers keep adding rigs. The U.S. benchmark has traded mostly between $50 and $55 a barrel for the last two months.

“There’s starting to be fatigue about the range we’ve been trading in,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “It won’t be summer until we break out to the upside.”

OPEC achieved the best compliance rate in its history at the outset of its accord to cut production, a plan that’s being supported by strong demand, the International Energy Agency said in a Feb. 10 report. In the past, OPEC had often struggled to fully deliver promised cuts due to a reluctance to lose income and market share. Former Saudi Arabian Oil Minister Ali al-Naimi said on Dec. 2 that, in the history of OPEC deals, “the unfortunate part is we tend to cheat.”

Meanwhile, U.S. producers last week extended the biggest surge in oil drilling in more than four years as the prolific shale plays of Texas and Oklahoma lure investment from Exxon Mobil Corp. and Continental Resources Inc.

U.S. crude output climbed to 8.98 million barrels a day in the week ended Feb. 3, according to the Energy Information Administration. That’s an increase of about half a million barrels a day from last year’s low, and the agency expects production to keep climbing to reach 9.53 million a day next year, the most since 1970. Read More…

READ  Delhi-howrah Rail Route To Have Boundary Wall Along It: Piyush Goyal
Credit By : Financialexpress.com

Leave a Reply

Your email address will not be published.