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Oil Prices Spiral Lower On Signs Of Strong U.S. Oil Recovery

Shale oil

Oil traded slightly lower early on Monday, as signals that the U.S. crude oil output is continuously recovering mostly outweighed signs that OPEC is largely sticking to its supply-cut deal.

As of 10:00 AM (EST) on Monday, WTI Crude was down 0.75 percent at US$52.77, while Brent Crude was trading down 0.65 percent at US$55.16.

On Friday, the weekly report by oilfield services provider Baker Hughes showed that the number of active oil and gas rigs in the United States increased by 18 for a total of 712 active rigs, which was 93 rigs above the rig count a year ago. Most of last week’s gains were oil rig gains, which were up 15, from 551 the previous week to 566 last week. As of Friday, the number of active oil rigs in the United States was 68 more than the same week last year. Drillers are still adding rigs to the Permian basin at record paces. After a 10-rig gain last week alone, the Permian now has 291 oil and gas rigs—109 rigs more than the same week last year.

The rising activity across the U.S. sent oil prices lower on Friday and early on Monday prices were still struggling to find a firm direction. Related: Fundamentals Be Damned – Oil Price Correction Likely

According to consultancy Petro-Logistics, which tracks OPEC supply, the cartel’s oil output would drop by 900,000 bpd in January. OPEC has pledged to cut total production by 1.2 million bpd over the first half of this year, and is being joined by non-OPEC producers that have promised to cut another 558,000 bpd.

“OPEC supply is on track to decrease by 900,000 bpd in January, suggesting a high level of compliance thus far into the production curtailment agreement,” Reuters quoted Petro-Logistics CEO Daniel Gerber as saying in an e-mail.

Other analysts were not so positive about the level of compliance, and Tamas Varga, analyst with PVM Oil Associates in London, told Reuters today that Petro-Logistics’ estimate was “not very encouraging” since it suggests that OPEC has achieved just 75 percent of its supply-cut target.

By Tsvetana Paraskova for Oilprice.com

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  • Sandra on January 30 2017 said:
    So, shale is recovering for recovering of oil prices as consequence of OPEC cuts. Prices go down because shale recovered. Shale is going down because its recovering plummeted the prices! It doesn't make sense to me. So, if prices continuing yo goind down, shale will close business again?
  • Dan on January 30 2017 said:
    @sandra whats going on is oil deflation. The market hasn't balanced out yet. But with the US expecting to complete the oil pipelines expect the price of oil to drop, causing more rigs to shut down. The reason why we didn't complete the pipes in the first place had nothing to do with protests, the reason was bc of deflationary pressures on the oil market which caused some companies to close up shop and open up when oil prices recovered. It's not worth it to keep investing money in oil when it's below $30, hence shutting down rigs. US companies will continue to lose money in the oil game. Iran can profit on $10 a barrel thats less than half our costs if countries in the middle east start to become threatened by the US they will continue to outproduce and try to hit our economy with deflation again.

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