Oil prices fall on increasing output, weak demand

Oil prices

Oil prices fell in trading on Monday after the United States and Libya reported increased output. Nabors photo.

Oil prices down over 1 per cent

Oil prices fell over one per cent in trading on Monday as investors weighed rising crude output from the US and Libya against OPEC-led production cuts.

Expectations for oil demand were also impacted by slower-than-expected growth in manufacturing in China as well as weakening confidence in the outlook for US manufacturing.

Brent crude for July was down 54 cents to $51.51/barrel by 11:50 a.m. and US crude for June was down by 53 cents, or 1.1 per cent to $48.81/barrel.

“The market continues to hunt for a bottom,” Gene McGillian, manager of market research at Tradition Energy told Reuters.

Since April 11, US crude has fallen 9 per cent as the global crude inventory drawdown has stalled despite OPEC’s production cuts that have amounted to around 1.8 million barrels per day (b/d) so far this year.

“With four months of the cutting in effect we haven’t seen a sizable reduction in global oil fuel inventories,” Tradition’s McGillian said. “It’s not sizable enough to see some proof, and the market is having trouble holding most of its gains since 2016.”

Last week, Baker Hughes reported US drillers added nine oil rigs, increasing the count to its highest mark since April, 2015.  US crude output is now at its highest rate since August, 2015.

On Monday, Libya’s National Oil Company (NOC) reported its production had risen over 760,000 b/d, the highest rate since December, 2014.  NOC says it plans to continue boosting production.

Libya was excluded from the OPEC supply cut because recent conflict and protests had drastically reduced the African nation’s crude output.

On May 25, OPEC and some non-cartel members will meet in Vienna to discuss extending the OPEC production cut agreement to the end of the year.  Some members, including Saudi Arabia and Kuwait have publicly supported prolonging the cutbacks.

 

Posted in: Energy Financial

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