Energy - - Feb 13,2017
Oil prices dropped on Monday on predictions that global fuel markets remained swollen even though OPEC-led crude production cuts.
It was noted that Brent crude futures were trading at $56.55 per barrel 0035 GMT, precisely down by 15 cents from the previous close.
Moreover, West Texas Intermediate (WTI) crude futures were lower by 12 cents at $53.74 a barrel.
During the first half of 2017, The Organization of the Petroleum Exporting Countries (OPEC) and other prominent producers including Russia had settled to cut production by almost 1.8 million barrels per day (bpd). This move was aimed to curb the global fuel supply overhang.
After the decision, there was widespread disbelief that all producers would actually fulfill the promised cuts, but agreement with the announced reductions is now projected to be around 90 percent.
According to traders, the crude was well maintained in the lower to mid-$50s per barrel due to the cuts; however, they pointed certain reasons which were preventing prices from spiking further unless production is trimmed deeper or for a longer span.
One of the prime reasons which are holding the oil prices in the global fuel markets is the continuous drilling activity in the United States. This action is pushing the production and discouraging OPEC's efforts to decrease output.
According to Baker Hughes, during the week to February 10, eight oil rigs were added enhancing the total U.S. count to 591.
Also, in Russia, there are traces that output may be dropping but that exports are shooting high, as the producers safeguard their major export markets at the cost of lower domestic supplies or by reducing inventories.
Looking at these trends, analysts assume that OPEC might have to continue its cuts for a longer period than the presently planned first half of 2017.