The oil bears continue to rule the roost globally as the US shale oil sector threatens the OPEC production cap accord, and the looming Fed rate rise unsettles investors at all levels.
Oil ended around three-month lows on Monday, falling for a six session in a row thanks to the new negatives, rising US stocks of crude, rising drilling activity in shale areas and concerns that OPEC will not renew its production cap after June.
But a clear direction for crude and other markets won’t come until after the US Federal Reserve gets its much anticipated rate rise out of the way early Thursday morning, our time, and tells the world where it now sees the path of US rates going in the rest of 2017.
The continuing weakness saw US crude oil futures briefly dip under $US48 a barrel before struggling back above that level.
This sort of hesitancy will be repeated while US crude production and oil rig use continues rising, as the former looks like doing for some months.
The weakness shouldn’t have an impact on the local stockmarket which is looking at a 15 point plus rise in the ASX 200 when trading resumes this morning.
Gold edged a couple of bucks higher to around $US1,204 an ounce and the Aussie dollar was higher around 75.75 US cents.
In New York, April West Texas Intermediate crude futures fell 9 cents, or 0.2%, to settle at $US48.40 a barrel. May Brent crude in London eased 2 cents to end at $US51.35 a barrel.
Just ahead of the US settlement, a report from the US Energy Information Administration (EIA) forecast an increase in oil output for major US shale plays in April. It sees a rise of 109,00 barrels a day (bpd) in April oil production, from a month earlier.
It said that crude production from seven major US shale areas is forecast to climb by 109,000 barrels a day to 4.962 million barrels a day in April from March.
Oil output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to see the largest climb among the big shale plays-up by 79,000 barrels a day.
That follows last week’s rise in US production past the level of a year ago. The EIA said not only had US stocks hit a record 528 million barrels of crude, but US output had hit 9.088 million bpd and will continue rising well past 9.1 million.
That is supported by the continuing rise in the number of active US rigs drilling for oil. That rose for a 9th week by 8 to 617 rigs last week, nearly 60% above the level of a year ago.
Baker Hughes said the total active US rig count, which includes oil and natural-gas rigs, rose by 12 to 768 – that’s 58% higher than a year ago.
The crude price has fallen by more than 9% since last Monday, its biggest week-on-week drop in four months.
Goldman Sachs said in a note it remained “very confident” about commodity prices and maintained its price forecast of $US57.50 a barrel for US crude in the second quarter.
On Wall Street, the S&P 500 was little changed at 2,373.5, the Dow slipped 0.1% to 20,881.7 and the Nasdaq Composite rose 0.3% to 5,877.2. Caution is the watchword for the next two days.
