USA and Brent crude prices diverge further

04 June, 2018, 10:01 | Author: Kathy Ellis
  • Future Shock

It's tough to stay positive on crude when the world's three oil superpowers are likely to increase production. For the week, WTI was on track to drop about 3 per cent, adding to last week's near 5 per cent decline.

West Texas Intermediate futures are down 2.1 per cent this week as pipeline bottlenecks in the Permian Basin add to pressure from unprecedented levels of USA production.

A tsunami of USA crude oil should be headed toward Asia, according to pricing on futures exchanges, but the reality in the physical market tells a somewhat different story.

The U.S. benchmark traded at a discount of more than $11 to Brent crude for the first time since March 2015.

In addition to the EIA's numbers, which come close to matching those of top producer Russia, Baker Hughes disclosed in a report released Friday that US energy companies added two oil rigs in the week to June 1, bringing the total count to 861, the highest level since March 2015.

Brent crude oil futures dipped for a second session on Monday, with prices coming under pressure from record USA output and expectations of higher OPEC supplies.

U.S. crude stockpiles fell 3.6 million barrels last week, the EIA said, exceeding expectations for a decline of 525,000 barrels.

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Brent was set to rise 1.8 percent for the week.

On a weekly basis, it rose to 10.8 million bpd last week, coming close to matching that of top producer Russian Federation, the EIA also said on Thursday.

Hedge funds reduced their WTI net-long position - the difference between bets on a price increase and wagers on a drop - by 14% to 324,235 futures and options during the week ended May 29, according to the U.S. Commodity Futures Trading Commission. It has doubled in less than a month, as a lack of pipeline capacity in the U.S. has trapped a lot of output inland.

Global benchmark Brent fell 77 cents to US$76.79 a barrel.

Oil prices continue to exert pressure and fears of growth in oil production by OPEC +. According to services group, Baker Hughes, another 2 rigs were activated last week to look for oil in the United States, taking the figure to 861 last week, the highest for more than three years.

Kazakhstan is consulting other producers on the potential easing of a 2016 oil output reduction agreement between the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC members, Kazakh Energy Minister Kanat Bozumbayev said recently.

Venezuela, whose output has plunged due to an economic crisis, told OPEC its production fell to 1.505 million bpd in April, believed to be the lowest in decades.

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