Oil Sinks on Output Complications

Source Commonwealth Bank

The crude oil prices are falling because of fears that rising USA production could lead to even larger volumes of stocks.

Oil prices fell yesterday as investors grappled with ongoing concerns over rising USA output and tight Opec supply, while last week's data showing speculators cut bets on oil suggested more selling could be seen. Gross short positions on the New York Mercantile Exchange climbed to their highest in almost a month.

At 0640 GMT, May WTI crude oil is trading $61.86, down $0.06 or -0.10% and June Brent crude oil is at $65.35, up $0.08 or +0.12%.

Both WTI and Brent as recently as Thursday had marked their lowest settlements since mid-February.

Latest US oil production data will be released on Wednesday.

While the U.S.is now pumping more than 10 million barrels a day, surpassing a record set in 1970, that boom is being accompanied by a surge in overseas shipments, helping drain stockpiles at the nation's largest storage hub.

Scaring off traders betting on further price increases has been a relentless rise in USA crude oil production, which soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.

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Healthy demand and ongoing supply restraint by a group or producers led by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation, however, are preventing further price falls.

Traders attributed the recent increase to a drop in the number of USA drilling rigs for production and the reported job increase in the U.S. which is expected to push fuel demand higher.

While US news has been dominated by the aluminum and steel tariffs proposed by President Donald Trump, the oil markets will not sustain significant price reactions, Poulsen said. That split is driven by differing views over whether $70 a barrel sends US shale companies into a production frenzy that could cause prices to crash.

The increase in rig count in the USA also points to more output to come in the future.

"Rising production and inventory in the United States has been reducing fund sentiment since it peaked at the end of January", ING commodities analysts said in a note.

April natural gas bucked the downtrend among its energy peers, settling up 1.7% at $2.778 per million British thermal units, with forecasts for more cold weather in the eastern US boosting expectations for heating demand.

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