Published: Thu, March 30, 2017
Markets | By Lucia Cruz

Oil prices rise as OPEC considers extending cuts

Oil prices fell on Tuesday, with USA crude dropping to its lowest since November, as concerns about new supplies overshadowed the latest talk by OPEC that it was looking to extend output cuts beyond June. Currently, oil investors face conflicting reports regarding output.

Another anonymous source suggested that the defacto OPEC leader Saudi Arabia is not happy with the return of shale oil and the kingdom's part in that play, which helped to stabilize the oil market.

Oil rose as an increase in us crude inventories was countered by a drop in fuel stockpiles in the world's largest oil consumer.

The main reasons behind the bearish sentiment is the active U.S. shale oil production after being calm for 2 years.

"Too many financial companies bet on high oil prices and they got scooped", he said. The Russian cuts are "slower than what I'd like", Al-Falih said in an interview with CNBC March 7.

The unintended outcome of the production cuts instituted by OPEC and 11 other oil-producing nations has been to "underwrite shale activity through a bullish credit market at a time when delayed delivery of the 2011-2013 capex boom could lead to record non-OPEC production growth in 2018".

WTI crude has "found itself vulnerable to heavy the rising drilling activity in the USA reinforced the oversupply fears", said Lukman Otunuga, research analyst at FXTM, in a note. OPEC members will meet in Vienna headquarter on May 25th.

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Brent remains well below this year's high above $58, hit shortly after January 1 when the deal between the Organization of the Petroleum Exporting Countries and non-OPEC states to curb supplies by 1.8 million barrels per day (bpd) came into effect.

Goldman included this chart which steps further back to illustrate the headache United States shale producers are giving their OPEC counterparts.

Gasoline stocks fell 2.8 million barrels, compared with analysts' expectations in a Reuters poll for a 2.0 million-barrel drop. Some people remain skeptical regarding whether OPEC - and non-OPEC countries - can comply with the agreements.

Still, compliance remains an issue. Gary Ross of Pira Energy noticed an interesting trend over the years.

The Organization of Petroleum Exporting Countries made a smart move to limit production, but the move has had some unforeseen effects, according to Goldman Sachs analysts. Liquified natural gas (LNG) prices rose significantly due to the OPEC and non-OPEC deals. Although demand is rising, supplies from USA refineries could rise faster.

What's helping prices stay in a holding pattern?

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