No let up in the downward pressure on global oil prices overnight Tuesday with another round of losses.
Crude oil futures fell again overnight for a 7th session, taking the loss so far this month to 12% (to a trading low of $US47.07 a barrel for the US style crude) as fears continue about the impact of rising US production, and the looming rate rise from the Fed.
The latest weakness came in the wake of the monthly OPEC oil report which showed Saudi Arabia had lifted production in February – even though the level of output was within the production cap agreed to last November, it triggered a sell off, sending prices below the $US48 a barrel.
That news saw the Saudis rush out a rare public statement in which it tried to allay fears that it had moved away from its production cap commitment.
The Saudi energy ministry rushed out a rare statement on Tuesday evening re-asserting its commitment to “stabilising the global oil market”, according to a report in the Financial Times.
The FT said the statement, released after 8pm Tuesday in the Saudi capital, Riyadh, which came after OPEC’s monthly report showed Saudi production had increased in February:
“Saudi Arabia assures the market that it is committed and determined to stabilising the global oil market by working closely with all other participating OPEC and non-OPEC producers,” the ministry said.
With US crude production rising strongly and worrying the market, the reported lift in Saudi output, triggered a nervous sell off and weaker prices.
US April crude futures fell 68 cents, or 1.4%, to settle at $US47.72 a barrel in New York, for a seventh straight session decline. May Brent lost 43 cents, or 0.8%, to end at $US50.92 a barrel in London for the sixth loss in a row. The uS price later recovered the $US48 a barrel level in after hours trading.
At first glance, the data looked like good news for the agreement the cartel made with some major non-OPEC producers late last year that would trim overall production by roughly 1.8 million barrels a day.
OPEC said crude-oil production by its members in February, based on secondary sources, fell by 140,000 barrels a day from the previous month to average 31.96 million barrels a day. OPEC members had agreed to cut their collective production to no more than 32.5 million barrels a day for six months starting in January.
Secondary OPEC sources also showed that output from Saudi Arabia was down about 68,100 barrels to 9.797 million barrels a day in February. But figures provided by the Saudis to OPEC, showed the country had produced 10.011 million barrels in February, up from 9.748 million barrels a day a month earlier.
“Saudi Arabia directly communicated that the country’s production returned above 10 [million barrels a day], which was actually more than 0.2 [million barrels a day] above OPEC’s own estimates,” Robbie Fraser, commodity analyst at Schneider Electric told marketwatch.com (and summed up the market’s fears).
“While that figure still keeps Saudi Arabia below their individual cap, it marks a departure from their initial commitment to cut beyond what was required in order to support the deal’s overall integrity,” he said in a daily note. US crude oil output rose to 9 million barrels a day in February, up 430,000 barrels a day from last September, according to the OPEC report. Drilling activity by US shale oil producers continues to grow, with output likely to rise by 180,000 barrels a day to average 4.44 million barrels a day in 2017, according to the US Energy Information Administration figures.
