Crude Oil/WTI: Oil skids on renewed concern of higher US production
- Oil is under pressure on increasing US production.
- OPEC-Non OPEC allies may execute a long-term alliance beyond 2018.
Crude oil (WTI) is now trading around 59.95, in the New York session, having skidded almost 1.07% and so far made a day low of 59.71 on renewed concerns about higher US shale oil production and rising inventories despite a weak USD and Saudi jawboning about the OPEC´s commitment on a production cut agreement.
As par UAE energy minister, OPEC and Russia may be preparing a long-term alliance on production control to be effective by Dec’18. OPEC-NOPEC may also build oil capacity buffers to temper any wild price upswings in oil due to a weak dollar; i.e. they are not willing to let oil go above $70-75, because in that scenario, US will produce even more and Russia may also exit the production cut deal.
Higher oil prices above $75 is not good for the Russian economy as the current production cut is hampering their oil capex and it is also helping their currency (Ruble) to gain more strength, negative for Russian exports.
It now seems that OPEC and NOPEC allies are increasingly worried about the futility of their production cut on higher US shale oil production by taking advantage of higher prices. Most of the OPEC-NOPEC cut may be natural but they are cleverly designed in such way that they look genuine and have a psychological effect on the overall market.
As par yesterday’s EIA data, US crude output hit a record of10.27 mbpd making it a bigger producer than Saudi Arabia, just behind Russia; US crude and gasoline inventories also rose last week.
Technically for oil, $58 is now an important support, whatever may be the narrative.