Oil recovers but the market is still under pressure

Oil recovers

Oil prices’ big losses last week has recovered ground this Monday, this is driven by the expectation that OPEC will extend a pledge to cut output cover all of 2017, even though a persistent rise in the U.S. drilling capped gains. Even though they were still below the $50 mark, which was pierced last Friday at $49.88 a barrel, the U.S. West Texas Intermediate or WTI crude oil futures CLc1 added a 0.5% or 26 cents, by 0401 GMT (12:01 am ET). Brent crude futures LCOc1 on the other hand, rose 0.6% or 30 cents to $52.26 per barrel.  

William O’Loughlin and investment analyst at Rivkin Securities said on Monday: “WTI oil slipped back below $50 per barrel level, amid concerns that the lack of inventory drawdown since the OPEC production cuts is a sign that the cuts are not enough to rebalance supply and demand and put a floor under prices.”

Both Brent and WTI oil benchmarks are down more than 7.5% since the end of last year. In accordance to these, a panel made up by OPEC and other allied suppliers have recommended an extension of output cuts by another six months from June, according to a source.

Oil prices fell suddenly last week on the back of stubbornly high crude supplies; this is despite the pledge given by OPEC or the Organization of the Petroleum Exporting Countries and some manufacturers to cut the production by almost up to 1.8 million barrels per day, for six month—starting from January 1, this is to support the market.

In accordance to this, United States drillers added oil rigs for a 14th week in a row, to 688 rigs, extending an  11-month recovery that will surely expected to boost U.S. shale production in May by the biggest monthly escalation in more than two years. The United States crude production is at 9.25 million barrels per day, which is almost up to 10% since mid-2016 and is approaching that of OPEC’s top exporter: Saudi Arabia.

This event and an expected fall in Iranian production lent markets some support on Monday. Iran’s crude oil exports are set to hit a 14-month low in May, suggesting the country is struggling to raise exports after clearing out stocks stored on tankers. However, Iranian oil exports—especially its core markets in Asia, had risen since the ending of most approvals against it in January 2016.

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