Oil Slightly Higher But Continued Oversupply Keeps Pressure on Prices

The US Energy Department noted that oil production, which averaged 8.9 million barrels a day last year, will rise to 9.3 million barrels a day this year.

Even though major OPEC producers and Russian Federation have cut output since January, fading faith in their agreement's effectiveness has sent prices down more than 17% this year, reversing the gains seen when they initially agreed to reduce output in late 2016.

Oil prices will keep on declining unless the shale oil producers reduce production when they run out of money after they fail to recover the production costs. Continued increases in drilling activity in USA shale basins, particularly in Texas, support production increases throughout the forecast.

Oil slumped to the lowest close in seven months on Thursday amid concerns that rising USA supplies will offset output cuts by the Organization of Petroleum Exporting Countries and allies including Russian Federation. Higher than expected demand growth in next year is forecast to be offset by supply increases from the United States and other non-Opec producers in what the IEA said "makes sobering reading for this producers looking to restrain supply".

Despite Friday's modest gains, oil prices still posted a fourth straight weekly decline.

Investment bank Goldman Sachs said if the US rig count holds, fourth-quarter domestic oil production would rise 770,000 bpd from the same period past year in the Permian, Eagle Ford, Bakken and Niobrara shale oilfields. India took in 4.2 percent less crude in May than it did a year before. Even if crude stockpiles do eventually fall, financially traded oil may still struggle to reflect it, said BofA Merrill Lynch.


Instead they have focused on the continued rise in the number of rigs drilling for oil in the United States and signs gasoline and diesel demand may not be growing fast enough to absorb the record fuel being produced by USA refineries. The oil cartel recently chose to continue their production cuts till the first quarter of 2018. That's a sign that market concerns about a lingering supply glut have extended beyond the short-term into later years.

According to the Minister, the extension of the agreement aimed at stabilizing prices and will favorably affect the balance of payments of oil-producing States.

EIA expects USA crude oil production to increase through 2018, averaging 9.3 million b/d in 2017 and 10.0 million b/d in 2018. As per the EIA, the USA onshore production from the Lower 48 states will grow by 340,000 bpd in 2017 and another 500,000 bpd in 2018.

Analysts said widening of positions by traders following rising demand in the spot market primarily kept refined soya oil prices higher in futures trade. The level of output is more than double the average production rate of 2016, which was 0.39 million barrels per day.

Generally, supply and demand have been the most important considerations. Lukoil is the second largest Russian oil company, and operates in many countries of the world with large investment projects.

But the production in 75,47 million barrels./day and demand of 95.12 million barrels. a year ago the oil market was supposed to be a clear deficit. The International Energy Agency noted that the oil supply in May rose by 585,000 barrels per day.

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