Record US output takes its toll on oil prices

Dwayne Harmon
July 21, 2018

Opec's de facto leader Saudi Arabia, which has been under pressure from US President Donald Trump to pump more and ease prices, said exports this month will be "roughly equal" to June, and they will drop by 100,000 barrels a day in August. West Texas Intermediate (WTI) crude futures declined 7 cents, or 0.1 per cent, to $68.69.

WTI was trading up 0.35% at $67.99 on the news, with Brent crude still trading down 0.82% at $72.30 at 2:24pm EDT.

Brent has fallen nearly 9% from last week's high above $79 on emerging evidence of higher production from Saudi Arabia and other members of oil cartel Opec as well as Russian Federation and the US.

Al-Aama described concerns that Saudi Arabia and its partners are moving to substantially oversupply the market as "without basis", explaining that the Kingdom is committed to working with its partners in the Declaration of Cooperation.

Crude oil prices are slightly lower today.

The market also got a boost from reports rebels in Yemen attacked an oil facility in Saudi Arabia, Kilduff told CNBC.

But the spectre of oversupply quickly returned, with a rise of more than 600,000 barrels in USA crude stockpiles, reported by the American Petroleum Institute late on Tuesday.

Trade tension between the United States and China could drag on the global economy, BMI Research said.

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China and the U.S. are in the midst of a trade spat, with President Trump imposing tariffs on some United States dollars 34 billion of Chinese goods earlier this month, prompting Beijing to retaliate.

After sliding lower early on in the session, crude oil futures cut losses and rebounded into positive territory amid high volatility on Thursday.

By 2030, around 6 million bpd of oil supply-mostly yet-to-find, contingent resources and fringe plays in the US -is expected to break even above $70 per barrel. "We don't have any problem selling our oil [to China]". Prices have been wavering after government data showed a surprise gain in nationwide crude inventories, while gasoline held in U.S. storage tanks dropped by the most since May on the back of robust fuel demand.

The US and her allies aren't helping because low oil prices mean fracking to produce shale oil has suddenly become profitable and weaning America off dependence on OPEC.

"They're pushing out a heck of a lot of crude right now, and they're anxious about the downward pressure on prices", said Mike Wittner, head of oil market research at Societe Generale SA in NY.

Saudi Arabia initially planned to reach record output of 10.8 million barrels a day this month, people briefed on production policy said late last month. The U.S. now has only one export terminal that can accommodate 2-million-barrel supertankers preferred by faraway customers in Asia and expansions at other ports aren't expected to be completed before 2020. The country has added almost 1-million barrels a day in production since November, thanks to rapid increases in shale drilling.

"After the mid-2020s, OPEC's role and importance on the oil market will become more prominent in ensuring upstream investment to meet global oil demand growth and offset declines from maturing assets", WoodMac says.

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