Oil prices fall as big speculators exit bullish positions
Oil prices fell in trading on Monday, despite reports that OPEC was considering extending the supply cut pact. Investors remain concerned that growing US shale output will impact already high global crude inventories.
Early in the day, prices rose on news of the possible extension of the OPEC deal, however, prices edged down as trading continued.
According to Reuters, big speculators are exiting bullish positions on persistently high inventory figures. In the past days, crude prices have made some attempts at a rebound following a 10 per cent decline a week-and-a-half ago, but the surges have been brief.
Analysts believe speculative investors are likely to keep reducing bullish positions due to increased US drilling activity, which will have an affect on OPEC attempts to balance the market.
“I think oil is reacting still to the steady rise in the U.S. rig count and the realization that momentum is building to the downside from the repositioning of speculative interests in the market,” John Kilduff, partner at Again Capital told Reuters.
A record high of over 150,000 contracts were cut last week when speculators bet on firmer U.S. and Brent oil prices.
On Friday, Baker Hughes reported a total of 631 oil rigs were operational in the week ending March 17, the most since September, 2015.
In trading on Monday, Brent was down 9 cents to $51.67/barrel at 11:53 a.m. US WTI crude futures rebounded from losses, but were down 43 cents to $48.35/barrel.
J.P. Morgan has cut their 2017 and 2018 price forecasts to $55.75 and $55.50 for Brent and to $53.75 and $53.50 for WTI, respectively, due to an increase in non-OPEC supply prospects.
“The risks that OPEC has painted itself into a corner cannot be ignored and it may need to extend, or even increase, cuts if the response from shale producers is more vigorous than we currently model,” J.P. Morgan said in a report.