Oil prices have been closely correlated with the accumulation and liquidation of hedge fund positions since the start of 2015. No one has ever been totally successful at doing that.
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U.S crude futures extended losses after the bigger-than-expected build, trading 92 cents lower at $52.22 a barrel. WTI is in while, Brent in blue. They have since recovered but are nowhere close to what obtained in mid-2014.
Saudi Arabia had a hand in “watering of the green shoots”, and welcomed the return of investment in United States shale.
Al-Falih said the deal, in effect since the beginning of this year, was working well but a decrease of 1.2 mbpd didn’t amount to much given the market size – 95 mbpd of oil is produced globally. As oil prices have increased, U.S. producers have deployed more drilling rigs, threatening a rebound in supplies unbound by the output pact.
Yet not everyone shares the bearish view, with analysts at Goldman Sachs publishing a more optimistic note on Monday claiming that oil demand is now poised to overtake supply.
“Saudi Arabia has cut production by more than what we promised [in December 2016], but we will not bear the burden of free riders”, Al-Falih noted.
Admittedly, some shale oil companies filed for bankruptcy but overall the U.S. shale industry has survived.
This is the genius of American capitalism-the ability to evolve and adapt. I think it’s getting time for a bit of a correction in oil prices.
Crude oil prices fell more than 5% on Wednesday, which marked the largest single-day drop in more than a year. What happened was the reverse-prices continued to fall.
During that period, crude oil production rose ~3.4%, according to weekly data.
The ministers also discussed potential “oil-for-goods” swaps at the meeting, as well as the progress in implementing the oil production cap agreement. Until recently, oil-producing countries were not making any investments in new oil projects. Minister Falih said that the US continues to be the bellwether for R&D and technology development/deployment, and to assist in the USA recovery will promote this trend. India’s oil demand growth will outpace China by then, the agency says.
Shale producers have been regarded as OPEC’s rivals and threats to the cartel’s efforts to bring oil supply and demand into balance.
The agency expects oil demand to increase in the next five years, surpassing the 100 mb/d threshold in 2019 and reaching about 104 mb/d by 2022.
Looking ahead, the medium term trend is still bullish but range bound action could continue for the time being.
“Despite the sanctions that were imposed on a number of our companies, our oil and gas sector has managed not only to overcome the difficulties but even to demonstrate positive dynamics”.
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For now, at least, oil remains king of the world.
