US Shale Growth Threatens OPEC Deal
Production of crude oil by Saudi Arabia rose by 263,000 barrels per day in February compared to the month before, according to the directly communicated figures reported in the monthly report by Opec (the Organization of the Petroleum Exporting Countries).
The price of May futures for Brent crude oil has dropped by 0.19 percent to $51.27 per barrel as of 04:07 EST.
Oil held losses below $49 a barrel before USA government data forecast to show record crude inventories expanded further.
At the close of Friday’s formal trading session on the NYMEX, West Texas Intermediate (WTI) crude oil was down nine percent ($4.84) to settle at $48.49 per barrel.
This has hit prices after the steadying influence that a deal to rein in production between OPEC and other major oil producers including Russian Federation was agreed upon late past year.
“Although Opec members may be commended on their attempt to stabilising the oil markets by cutting production, the fact that oil prices are nearly where they were when the initial production cut deal was announced is a major cause for concern”. Kuwait supports extending OPEC’s output deal beyond June, Kuwait’s official news agency Kuna reports, citing Kuwait Oil Minister Issam Almarzooq.
Saudi Arabia told OPEC it raised output back above 10 million barrels a day in February, reversing about a third of the cuts it made the previous month.
Oil extended its decline below $50 a barrel as USA drillers continued to boost activity, countering OPEC’s efforts to drain a global glut.
“We think that in the long term global oil demand dynamics and reduced investment during the period of ultra low prices will balance the market, but that the risk of a price war resuming remains, ” the spokesman said.
Overshadowing the curbs, US crude inventories surged last week by 8.2 million barrels. Non-member production, including that from USA and Canadian shale drillers, is likely to grow by 400,000 BPD, OPEC said.
USA oil and gas drilling has picked up, with producers planning to expand crude production in North Dakota, Oklahoma and other shale regions, while output has jumped in the Permian, America’s largest oilfield. Oil production in the US continues to rise.