August Crude Oil Futures
Profit-takers and bargain-hunters are helping to prop up crude oil prices from 10-month lows late in the week. Aggressive counter-trend investors may be buying relatively cheap crude oil despite bearish market sentiment due to the persistent supply glut and doubts over the OPEC-led plan’s ability to balance the market.
Despite the technical bounce, August West Texas Intermediate crude oil is still in a position to close lower for the week and month while setting their worst first-half year decline in 20 years. This is taking place despite the OPEC-led plan to reduce output, trim the global supply glut and stabilize prices.
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This week’s price action strongly suggests that traders remain skeptical of OPEC’s ability to balance supplies. While the plan to cut production by 1.8 million barrels per day (bpd) has been in place since January, not all OPEC and non-OPEC participants have fulfilled their pledges. Additionally, their attempts are being met by soaring output from the United States.
Recent data shows that increased shale drilling has pushed U.S. oil production more than 10 percent over the previous year to 9.35 million bpd, close to the production level of top exporter Saudi Arabia.
Other reports show that inventories through April are up 80 million barrels since the beginning of the year, highlighting the inefficiency of OPEC’s market management.