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Oil Slips as U.S. Producers Pump More

17 Apr 2017 9:13 am
By Sarah McFarlane and Jenny W. Hsu 

Crude futures fell on Monday, under pressure from rising U.S. output with shale producers surprising some investors with their agility.

Brent crude, the global oil benchmark, fell 0.9% to $55.39 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.9% at $52.72 a barrel.

"Major forecasting agencies the IEA, EIA and OPEC, are all raising their expectations of U.S. production and I think that is what's hanging over the market," said Edward Bell, analyst at the Dubai-based Emirates NBD bank.

Weekly data published by the U.S. Energy Information Administration showed crude output is now at 9.24 million barrels a day. The rising output is mostly coming from shale producers who are able to respond to price moves quickly by ramping their production up or down.

"Continuing concerns surrounding rebounding U.S. output pressured, with the latest EIA weekly data showing U.S. crude output is now at a 86-week high," said consultancy JBC Energy in a note, adding that the Baker Hughes rig count data was also bearish.

The U.S. oil rig count rose for the 13th straight week in the week of April 13, according to the data published on Friday. At a total of 683, the current tally is the highest in two years.

The surge in U.S. production stands to be a major threat to undercut an effort by the Organization of the Petroleum Exporting Countries to reset the still-oversupplied market to a better balance. The group and 11 other non-OPEC oil producers have agreed to cut production by 1.8 million barrels a day in the first half of the year.

Four months into the agreement, OPEC said its latest production fell by 153,000 barrels a day to average 31.93 million barrels a day. The cartel will discuss whether to extend the cuts into the second half of the year at a meeting on May. 25.

"When we get closer to the OPEC meeting next month there is obviously going to be more speculation about whether or not it is going to be rolled over," said Mr. Bell

The cuts by OPEC members and other producers, combined with seasonal gasoline demand during the summer season, means "the rebalancing story will take place by the year-end," said Barnabas Gan, an economist at Singapore bank OCBC, who expects U.S. oil prices to hit the $55 to $60 range in the next few months.

Trading will likely be subdued Monday as several major markets in the region are closed due to the Easter holiday.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.9% to $1.72 a gallon. ICE gas oil changed hands at $493.75 a metric ton, down $4.25 from the previous settlement.

(END) Dow Jones Newswires

April 17, 2017 05:13 ET (09:13 GMT)

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