Oil price slides on
prospect of rising U.S. production
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[January 18, 2017]
By Ahmad Ghaddar
(Reuters) - Oil prices fell on Wednesday on expectations that U.S.
producers would boost output, just as OPEC signaled that a global
supply-reduction deal will shrink the oil glut this year.
Brent crude futures, the international benchmark for oil prices, were
down 75 cents $54.72 a barrel at 1230 GMT.
U.S. West Texas Intermediate (WTI) crude oil futures were trading down
81 cents at $51.67 per barrel.
U.S. shale production is set to snap a three-month decline in February,
the U.S. Energy Information Administration said on Tuesday, as energy
firms boost drilling activity with crude prices hovering near 18-month
February production will edge up 40,750 barrels per day (bpd) to 4.748
million bpd, the EIA said. In January, it was expected to drop by 5,900
"It's the eternal question about the current flat price and what it does
to U.S. crude oil production," Petromatrix oil strategist Olivier Jakob
The Organization of the Petroleum Exporting Countries, excluding
Indonesia, pumped 33.085 million barrels per day (bpd) last month,
according to figures OPEC collects from secondary sources, down 221,000
bpd from November, OPEC said in a monthly report on Wednesday.
OPEC cut its forecast of supply in 2017 from non-member countries
following pledges by Russia and other non-members to join OPEC in
OPEC now expects non-OPEC supply to rise by 120,000 bpd this year, down
from growth of 300,000 bpd last month, despite an upwardly revised
forecast of U.S. supply.
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Petrol nozzles are seen at Cosmo Energy Holdings' Cosmo Oil service
station in Tokyo, Japan, December 16, 2015. REUTERS/Yuya Shino/File
the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil
output by nearly 1.8 million bpd, initially for six months, to bring supplies
back in line with consumption.
The output cuts agreed by OPEC and others are likely to come largely from field
and refinery maintenance, BMI Research said in a note. It said oil producers are
expected to use lower volumes needed for domestic power generation in a bid to
maintain export volumes.
"Sticking to output targets is important but export volumes from the
participating countries are a much better indicator of how the cuts will affect
the market," it said.
"Participating members are keen not to sacrifice vital export revenue so are
trying to find ways to limit domestic crude usage in order to prioritize filling
their contracts to foreign refiners."
A committee responsible for monitoring compliance with the agreement meets in
Vienna on Jan. 21-22.
(Additional reporting by Naveen Thukral in Singapore. Editing by Jane Merriman
and David Evans)
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