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Oil prices mixed due to rising US production, geopolitical uncertainties

Oil prices

Oil prices were mixed in choppy trading on Thursday. Encana photo.

WTI oil prices down by 17 cents, Brent up by 6 cents

Oil prices took a bumpy ride in trading on Thursday and ended mixed after as investors weighed rising US production, geopolitical uncertainties and the possibility that the OPEC supply cut deal will likely be extended.

WTI futures were down for the fourth straight day, falling by 17 cents to $50.27/barrel.  Brent futures posted gains of 6 cents to $52.99/barrel.

Saudi Arabia and Kuwait are hinting that most OPEC members and other oil producing countries including Russia will likely extend their production cut agreement beyond June.

Reuters reportes that at a press conference in the United Arab Emirates, Saudi Energy Minister Khalid al-Falih said “there is consensus building but it’s not done yet.”

Despite that optimistic note from Falih, oil prices did not rise because analysts are concerned about growing US shale production.

“You would have thought that that would have reversed yesterday’s fall, but it didn’t,” James Williams, president of WTRG Economics in London, Arkansas told Reuters. “We’re getting a little bit of price recovery, but it’s still not enough to reverse the shale threat.”

Crude prices took a tumble on Wednesday, dropping over 3.5 per cent on US Energy Information Administration data showing crude stocks fell less than expected last week and gasoline stocks increased by 1.5 million barrels.

The data also showed that US crude production increased to 9.25 million b/d, which is up by almost 10 per cent since mid-2016.  In March, US crude stocks reached all and time-high of 532 million barrels.

Thursday marked the monthly expiration for May contracts and futures trading was light, with traders shying away from big bets.

Referring to the four-day losing streak, Phil Flynn, senior market analyst at Price Futures Group told Reuters “Everything was really shaky today as people are afraid to get in before the expiration.”  He added “There’s hesitation to jump in and catch a falling knife.”

Another factor impacting oil prices is geopolitical uncertainty with a presidential election in France beginning on Sunday.  The outcome could be the deciding factor in the viability of the European Union.

As well, North Korean state media warned the US of a “super-mighty preemptive strike.”

Despite the current dour global mood, John Saucer, vice president of research and analytics at Mobius Risk Group said the market was not jittery.  He told Reuters that low volatility and weak oil prices do not “really signal a market that’s too concerned about geopolitical hotspots.”

 

Posted in: Energy Financial

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