- Title: Oil falls as signs of U.S. output rise overshadow OPEC-led cuts
- Date: 23rd January 2017
- Summary: LONDON, ENGLAND, UK (JANUARY 23, 2017) (REUTERS) (SOUNDBITE) (English) CHRIS BEAUCHAMP, MARKET ANALYST, IG, SAYING: "I think it will certainly help activity and that should boost the economy overall but they might not get quite as high a price as they are hoping for because if they continue to boost production you can expect the price to move lower. I think the increase in activity will certainly act as a boost to the economy but it's looking beyond what it does for the economy and what it does for energy security? There was a very big point in his campaign that he wants to reduce American reliance on places like the Middle East so I think it is something they will push ahead with regardless of the impact on prices and that signals a big warning for OPEC in the next few months really, is their deal going to be undermined by further production increases in the U.S."
- Embargoed: 6th February 2017 11:50
- Keywords: Oil falls signs U.S. output rise overshadow OPEC-led cuts
- Location: LONDON, ENGLAND, UK, / UNKNOWN
- City: LONDON, ENGLAND, UK, / UNKNOWN
- Country: Various
- Topics: Commodities Markets,Economic Events
- Reuters ID: LVA00460AX37X
- Aspect Ratio: 16:9
- Story Text:Oil prices fell one percent on Monday (January 23) as signs of a strong recovery in U.S. oil drilling activity outweighed news that OPEC and non-OPEC producers were on track to meet output reduction goals set in December.
Global benchmark Brent crude prices were down 53 cents to $54.96 a barrel at 1026 GMT, while U.S. West Texas Intermediate crude futures traded at $52.61 a barrel, down 61 cents, or 1.1 percent, on Friday's close.
Ministers representing members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers said at a meeting on Sunday that of almost 1.8 million barrels per day (bpd) they had agreed to be taken out of the market, 1.5 million bpd had already gone.
"The market was happy with the deal OPEC got but we had a report from them only last week suggesting that a bigger cut might be necessary, particularly as we are seeing that U.S. production continues to ramp up. So there's a sense that the output cut did what it did but it only took us back to April 2015 production levels, if that, and therefore there is a lot more to be done to get the oil market back into balance between demand and supply. Now all of this takes time to play out and everyone may be keen to trumpet that everyone is sticking to the deal but it's not hard if you look below the surface to find that production in key countries, places like Iraq, Iran and Africa as well, could be ramping up and that would put a lot of pressure on the other members to maybe look at increasing the cut to production over the next few months just to try and keep the impression that OPEC is living up to its commitment," said IG Market Analyst, Chris Beauchamp.
U.S. drillers added most rigs in nearly four years last week, data from energy services firm Baker Hughes showed on Friday.
This extends an eight-month drilling recovery and is supporting signs that U.S. production will continue to rise strongly just as other producers are cutting output.
U.S. oil production has risen more than 6 percent since mid-2016, although it remains 7 percent below a historic high in 2015. It is back to levels of late 2014, when strong U.S. crude output contributed to a crash in oil prices.
"I think the increase in activity will certainly act as a boost to the U.S. economy but it's looking beyond what it does for the economy and what it does for energy security? There was a very big point in his campaign that he wants to reduce American reliance on places like the Middle East so I think it is something they will push ahead with regardless of the impact on prices and that signals a big warning for OPEC in the next few months really, is their deal going to be undermined by further production increases in the U.S.," added Beauchamp.
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