Saudi Crude Output Cuts In January Bring Exports Down 3.8 Percent

Owen Stevens
March 21, 2017

At 10.30am GMT on Monday (20 March), prices for West Texas Intermediate crude fell 1.56% to $48.03 a barrel, while the cost of a barrel of Brent crude slipped 1.21% to $51.14.

"The continued increase in U.S".

In a further sign that OPEC kingpin Saudi Arabia was adhering to its output cut pledges, official data showed that its crude exports fell by about 300,000 bpd in January. Two years ago, analysts assumed that oil prices below $60 would cause a huge decline in shale oil production.

In the seven days to 17 March, the sector saw 14 rigs added, bringing the total tally to 631, the highest level since September 2015.

Futures briefly pared losses after Reuters reported that Opec producers increasingly favour extending production cuts into the second half of the year.

The data from the U.S. thwarts the Organization of the Petroleum Exporting Countries (OPEC) deal with Russian Federation and other producers to cut production to prop up prices.

World fuel indexes dropped to their lowest levels since December during the week when the optimism surrounding the OPEC deal was just getting underway, but turned into upward correction recently as US crude stockpiles unexpectedly decline last week.

Before the recent sell off, hedge fund managers had boosted their net long position in Brent and WTI by 530 million barrels between the middle of November and the middle of February.

To halt the decline, OPEC members increasingly favour extending the pact beyond June to balance the market, sources within the group said, although they added that this would require non-OPEC members like Russian Federation to also step up their efforts.

Fund managers' net long position has been reduced by a cumulative total of 230 million barrels over the last three weeks from a peak of 951 million barrels on February 21 (http://tmsnrt.rs/2n0kxpj).

Oil prices were also hit by information from Libya, which is exempt from the cartel's deal due to fighting in the country. Additionally, refineries tend to reduce their oil stocks at the end of each year for tax reasons.

Mr Sukrit Vijayakar of energy consultancy Trifecta said the rising drilling activity was "reinforcing the expectation of higher United States production offsetting (Opec's) supply cuts". On the other hand, if prices remain low, OPEC only stands to lose market share to its competitors by continuing the production cuts. Citigroup Inc. said OPEC's output reductions aimed at easing the glut are "real" and already are cleaning up the market. Also, two years of disagreements between the oil producers threw the deal into doubt.

Other reports by VgToday

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