OPEC Favors Production Cut Extensions As Next Meeting Nears

Oil falls as bullish bets fade with US output rise

The price of Brent crude is now trading at $51.92 while West Texas Intermediate (WTI) is at $48.45 a barrel with analysts suggesting oil prices could face further pressure if managers decide to sell off the remaining net-long positions totalling 820 million barrels, according to the FT. US West Texas Intermediate (WTI) crude futures slipped 48 cents, or 0.98 per cent, to US$48.30 a barrel.

Oil prices rebounded from session lows sustained in early morning trade, after insider sources from within OPEC said Monday, that OPEC oil producers increasingly favour extending its deal to cut oil production beyond June but expressed the need for Russian Federation and other non-members to remain part of the initiative.

"Oil has been unable to use the weaker U.S. dollar to continue its recovery rally from last week's three-month lows as rising United States production concerns continue to weigh upon the marketplace", said Henry Croft, research analyst at Accendo Markets. Sellers choose to react to worries about growing US oil output and high inventories, mostly in reaction to last week's increased rig count.

The increasing USA oil production continued to weigh on OPEC's effort to rebalance the oil market.On November, 2016, OPEC and non-OPEC oil producers agreed to cut production of 1.8 million barrels per day.

Last week speculators cut more than 150,000 contracts betting on firmer U.S. and Brent oil prices, a record high.

Producers and merchants increased their short positions, or bets on lower prices, to 739,736 futures and options during the report week, the highest level in a month.

More news: Here's Judge Gorsuch's Full Opening Statement

On the basis of a normally distributed bell curve, applying a standard deviation of 1.0 and an implied volatility of 25.9%, U.S. crude oil futures for May delivery could close between $47.54 and $50.58 per barrel in the next seven days.

Yet, since the Saudi-led Opec cartel agreed to cut oil production in November, the U.S. shale industry has been boosted to levels not seen since 2014.

Last week speculators cut more than 150,000 contracts betting on firmer USA and Brent oil prices, a record high.

Prices briefly surged into positive territory after sources within the group said Opec was considering extending production cuts into the second half of 2017. The global benchmark crude traded at a premium of $2.64 to May WTI, the widest since January. "They might need to reduce shipments more or extend this beyond June". OPEC members actually exceeded their targeted cuts, partially offsetting a 64% compliance rate among non-members.

"If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd for 1H17, assuming, of course, nothing changes elsewhere in supply and demand", the IEA said.

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