Published: Tue, March 13, 2018
Money | By Armando Alvarado

Worry Over Rising US Output Causes Crude to Drop 1.1 Percent

Worry Over Rising US Output Causes Crude to Drop 1.1 Percent

Oil futures settled lower Monday, as the latest data fed expectations that USA output will continue to rise this year, erasing some of the price gains scored late last week on a lower weekly US oil-rig count. US West Texas Intermediate (WTI) crude futures fell 68 cents, or 1.1 per cent, to settle at US$61.36 per barrel.

Both WTI and Brent as recently as Thursday had marked their lowest settlements since mid-February.

Iran wants OPEC to work to keep oil prices around $60 a barrel to contain US shale producers, Oil Minister Bijan Zanganeh told The Wall Street Journal in a rare interview, while Saudi Arabia has played down shale's ability to upset the market and has indicated $70 for oil is acceptable.

"The big take away is the implied annual rate of change", James Williams, energy economist at WTRG Economics, told MarketWatch.

"Oil prices fell on the back of concerns that surging US production. could push inventories in the USA higher", ANZ bank said on Tuesday.

Crude oil prices fell Monday ahead of closely watched U.S. inflation data that may set the stage for interest rate hikes.

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Investors will then be anticipating OPEC's next move as concerns about USA production will likely dominate the oil cartel's June meeting in Vienna.

The rising USA output comes largely on the back of onshore shale oil production.

"The strong shale oil revival is starting to get more attention", said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "But they may say we can't have these high prices and scale back the cuts".

In oil markets, United States energy companies last week cut oil rigs for the first time in nearly two months, with drillers cutting back four rigs, to 796, Baker Hughes energy services firm said on Friday. It was the first such decline in seven weeks.

Hedge funds and money managers pared their bullish wagers on USA crude oil, with long positions falling last week for the first time in three weeks.

"Permian and Bakken shale basins still saw active oil rigs rising by 2 and 3 last week, respectively, and are likely to keep U.S. oil production on increasing trend", ING said. The most bullish scenario will be a weaker U.S. Dollar and higher equity prices.

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