By August 21, 2017 Read More →

Oil prices drop, decline shuts down late last week’s rally

Oil prices

Oil prices fell on Monday despite the declaration of a force majeure by Libya’s NOC after a pipeline blockage at the company’s Sharara field. Reuters file photo by Ismail Zitouny.

Oil prices down almost 2 per cent

Oil prices fell nearly 2 per cent on Monday, bringing to a halt last week’s rally that saw crude rise over 3 per cent on Friday.

Brent crude fell $1.40 to $51.32/barrel by 2:10 p.m EDT and US WTI dropped by $1.41 to $47.10/barrel.

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Han van Clef, senior energy economist at ABN Amro told Reuters “we are currently seeing some profit-taking after Friday’s strong rally ahead of this week’s inventory data.”

“Fresh uncertainty about inventories and OPEC compliance (with agreed production cuts) could be enough reason to sell some of the long positions.”

Danny Campbell, president of West Texas-based Henry Resources, said he expects to sees prices trading in a range of $45 to $55 a barrel, with $50 probably a long-term price.

“If we use $50, we can make a lot of decisions at $50,” he told the Midland Reporter-Telegram.

“If it goes much above $55, that leads to too much supply; if it goes below $40 to $45, operators see their discretionary cash flow dry up. (The market) is trying to find that balance between the high $40s and low $50s.”

Data on Friday from Commodity Futures Trading Commission showed US hedge funds and money managers have begun cutting bets on rising prices.

But, European investors disagree.  Reuters reports data from the InterContinental Exchange shows speculators raised bullish Brent crude bets last week.

US crude production may begin to slow as oil companies begin to cut drilling operations.  On Friday, Baker Hughes reported drillers cut the rig count by five in the week to Aug. 18, dropping the total rig count in the US to 763.

Along with the drop in production in the States, US commercial crude stocks have declined by 13 per cent from March peaks of 466.5 million barrels.

Kuwait’s oil minister is crediting the OPEC supply cut with the drop in US crude inventories.

In January, OPEC began its campaign to reduce the global glut of crude by cutting its production by 1.2 million barrels per day (b/d).  Russia and other participants in the agreement brought the total pledged cuts to 1.8 million b/d.  During the early days of the pact, compliance was strong, but increased production from Libya and Nigeria have added to OPEC’s output.

On Sunday, Libya’s National Oil Corp declared a force majeure on loadings of Sharara crude from its Zawiya oil terminal due to a pipeline blockage.

The field, Libya’s largest, had been producing up to 280,000 b/d prior to the disruption.



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