Following announcements by Saudi Arabia and Russia that they would increase their oil output and the U.S. production continuing at the current rate, there was a further fall in global crude prices on Monday – extending the fall the day before.
Brent crude futures were at $75.09 per barrel which is a fall of $1.35, or 1.8 percent, from their last close. On the other hand, the U.S. West Texas Intermediate (WTI) crude futures price was at $66.22 a barrel, a drop of $1.66, or 2.5 percent. There has been a drop of 6.4 percent and 9.1 percent in the price of Brent and WTI respectively compared to the highs that they touched in May.
A production cut to reduce supply of crude in the global market and thereby shore up prices was undertaken in 2017 by the Organization of the Petroleum Exporting Countries (OPEC and some pf the major oil producers and non-OPEC member such as Russia. This was taken after the price of global crude fell to its lowest price in over a decade and were priced at less than $30 per barrel.
The crude prices have seen a rise since the production cuts were imposed last year as Brent surpassing the $80 per barrel mark earlier in May which raised concerns that the such higher prices would result in stalled economic growth and higher inflation.
"The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth," Chetan Ahya, chief economist at U.S. bank Morgan Stanley, wrote over the weekend in a note.
And with Iran expected to be hit by strict U.S. sanctions, top oil producers Saudi Arabia and Russia announced on Friday that any gap in world crude left because of U.S. sanctions would be fulfilled by them by increasing production by some 1 million bpd and the two countries were discussing the possibilities of that.
"Crude oil prices collapsed ... after reports emerged that Saudi Arabia and Russia had agreed to increase crude oil production in the second-half of the year to make up for losses elsewhere under the production cut agreement," ANZ bank said on Monday.
In the U.S., search for new oil fields to exploit by drillers have remained unabated which indicated that the U.S. output of crude would not come down also.
in the week ended May 25, 15 rigs looking were added while seeking out new oil by U.S. energy companies. This brought the total number of rigs to 859 which is the highest for the country since 2015. This is a clear indicator that the country would continue to increase crude production.
In the last two years, there has been a 27 per cent increase in U.S. crude production and it has now reached 10.73 million barrels per day (bpd). That figure is close to what Russia produces at 11 million bpd.
"Oil prices are showing symptoms of a falling knife as investors are jittery on the prospect of increased production from three of the world's top producers," Singapore-based brokerage Phillip Futures said on Monday.
(Source:www.cnbc.com)
Brent crude futures were at $75.09 per barrel which is a fall of $1.35, or 1.8 percent, from their last close. On the other hand, the U.S. West Texas Intermediate (WTI) crude futures price was at $66.22 a barrel, a drop of $1.66, or 2.5 percent. There has been a drop of 6.4 percent and 9.1 percent in the price of Brent and WTI respectively compared to the highs that they touched in May.
A production cut to reduce supply of crude in the global market and thereby shore up prices was undertaken in 2017 by the Organization of the Petroleum Exporting Countries (OPEC and some pf the major oil producers and non-OPEC member such as Russia. This was taken after the price of global crude fell to its lowest price in over a decade and were priced at less than $30 per barrel.
The crude prices have seen a rise since the production cuts were imposed last year as Brent surpassing the $80 per barrel mark earlier in May which raised concerns that the such higher prices would result in stalled economic growth and higher inflation.
"The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth," Chetan Ahya, chief economist at U.S. bank Morgan Stanley, wrote over the weekend in a note.
And with Iran expected to be hit by strict U.S. sanctions, top oil producers Saudi Arabia and Russia announced on Friday that any gap in world crude left because of U.S. sanctions would be fulfilled by them by increasing production by some 1 million bpd and the two countries were discussing the possibilities of that.
"Crude oil prices collapsed ... after reports emerged that Saudi Arabia and Russia had agreed to increase crude oil production in the second-half of the year to make up for losses elsewhere under the production cut agreement," ANZ bank said on Monday.
In the U.S., search for new oil fields to exploit by drillers have remained unabated which indicated that the U.S. output of crude would not come down also.
in the week ended May 25, 15 rigs looking were added while seeking out new oil by U.S. energy companies. This brought the total number of rigs to 859 which is the highest for the country since 2015. This is a clear indicator that the country would continue to increase crude production.
In the last two years, there has been a 27 per cent increase in U.S. crude production and it has now reached 10.73 million barrels per day (bpd). That figure is close to what Russia produces at 11 million bpd.
"Oil prices are showing symptoms of a falling knife as investors are jittery on the prospect of increased production from three of the world's top producers," Singapore-based brokerage Phillip Futures said on Monday.
(Source:www.cnbc.com)
