Oil prices slip as
reviving shale balances OPEC cuts
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[February 07, 2017]
By Christopher Johnson
(Reuters) - Oil prices slipped on Tuesday as lower production by OPEC
and other exporters was undermined by growing evidence of a revival in
U.S. shale production and sluggish demand.
Benchmark Brent crude <LCOc1> was down 30 cents at $55.42 a barrel by
1330 GMT. On Monday, the Brent futures contract closed down $1.09 a
barrel. U.S. crude <CLc1> was 30 cents lower at $52.71 after closing
down 82 cents on Monday.
Prices have been supported over the last two months by efforts by the
Organization of the Petroleum Exporting Countries and other exporters to
cut output by almost 1.8 million barrels per day (bpd) in the first half
But while OPEC and Russia have together cut at least 1.1 million bpd so
far, rising U.S. production, as well as signs of slowing demand growth,
threaten to undermine these efforts.
"The general perception is that OPEC is cutting production, which is
supporting prices, but high stock levels, rising rig counts and growing
U.S. production are capping gains," said Tamas Varga, analyst at London
brokerage PVM Oil Associates.
Societe Generale oil analyst Michael Wittner said U.S. shale oil output
was recovering faster than expected as more oil rigs drilled better and
more efficient wells more quickly.
"Rig counts are increasing at an accelerating pace, and given the
technological advances of the past three years, this should translate
into significant supply," Wittner said.
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shale is coming back, and itís coming back strong."
the beginning of the year both crude contracts have traded within a $5 per
barrel price range, suggesting a lack of strong price momentum in either
"$55 per barrel is quite obviously the pivot point in this market ... and it has
been for some time," said Matt Stanley, a fuel broker with Freight Investor
Services (FIS) in Dubai.
Chinese oil demand grew at the slowest pace in at least three years in 2016,
Reuters' calculations based on official data showed, the latest indication that
demand from the world's largest energy consumer has diminished.
And there are concerns U.S. gasoline demand is stalling.
Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of
2017, compared with an average increase of less than 12 million barrels at the
same time of year during the previous decade, according to official inventory
data, implying either stalling demand or ongoing oversupply.
(Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely
and Susan Thomas)
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