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US Oil Output Headed to Four-Year Low as Shale Boom Sputters
Speculation that top producers might agree soon to an output freeze also supported crude oil.
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Oil has gained about 50 percent from 12-year lows hit less than two months ago, since OPEC members Saudi Arabia, Qatar and Venezuela, along with non-OPEC exporter Russian Federation, pledged to leave supply at January’s levels if others cooperated.
U.S. West Texas Intermediate (WTI) crude futures were at $37.48 a barrel, down 42 cents from their last close but nearly 45 percent up from their 2016 low on February 11. “As a result, higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices”, the bank said.
Producers in and outside the Organization of the Petroleum Exporting Countries plan to meet in Moscow on March 20 to discuss an output freeze, an Iraqi oil official told state newspaper Al-Sabah.
“We feel that values could consolidate well into next week or longer, prior to enough momentum shift to force an ultimate $9-10 crude price cut”, said Jim Ritterbusch at Chicago-based oil advisory firm Ritterbusch & Associates.
“I’m still not leaning towards prices moving up sustainably because the fundamentals have not changed”, said Phillip Futures analyst Daniel Ang.
“While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment”, the analysts wrote.
Crude stocks at the Cushing, Oklahoma, delivery hub for WTI increased by 692,000 barrels, the API said. “Falling domestic crude production is also supportive”, said Virendra Chauhan of Energy Aspects.
The slide in oil prices, however, supports some analysts’ view that the rally is and will be short-lived.
Despite strong oil demand, questions about the sustainability of growing consumption weighed on markets as China’s economic downturn saw its overall exports plummet by a quarter in February in the worst slump since 2009.
China’s February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country’s Passenger Car Association showed.
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“This is really a poor start for trade this year”, said Zhang Yongjun, senior economist at the China Center for International Economic Exchanges.