A US oil production drop enabled crude oil prices to rise Monday. The oil price rise was 1.5%, creating the longest period of daily gains in over five years. While US output was estimated to drop, the potential OPEC production increase may stop these gains dead.
Brent crude futures rose to $49.48 a barrel, a 71 cent rise by 1530 GMT. This compares with 5.2% increase last week – the first weekly price increase for six weeks. US crude futures rose 81 cents to $46.85 a barrel. Much, if not all, of this was connected to US production dropping by 100,000 barrels a day due to maintenance stoppages and tropical storms. The US oil rig count has also gone down.
OPEC oil production increased sharply last month, and Nigeria and Libya have been steadily increasing their own output. US oil output has been steadily increasing with shale oil entering the arena. However, new drilling has fallen – the first fall since January, and crude output in general dropped in April. That was the first drop in crude production this year.
Analysts believe that US crude production had fallen due to a drop in prices. It is believed that May and June statistics will show that oil output is slowing down and that crude supply is increasing at a slower rate than most have believed it to be recently. That said, prices are still 13% lower this year than last year, largely due to the US refusing to cut back on production, and continuing with its shale oil extraction program.
It was largely US shale oil production that had been upsetting OPEC and keeping crude prices down. The US oil industry dropped two oil rigs since January. Many believe that this does not compensate sufficiently for the increased shale oil output. The current low price tends to support this. The drop in the increase in production rate is just that – it does not indicate a production drop per se, only that the rate of increase has fallen.
The US oil rig count is still over twice the number of rigs in the same week a year ago. So let’s not talk about production cuts just yet! OPEC production also hit a high. This time 2017 high. Production in June increased to 32.72 million barrels a day from 32.44 million barrels a day. This, after OPEC, agreed to keep production down to help support oil prices.
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