Oil down 1% on continued concerns over USA output

Gladys Abbott
March 14, 2018

The oil prices are looking to continue their slump this week as the growing output numbers continue to drive investors wary.

Oil markets edged up on Monday, thanks to a drop in the number of USA rigs drilling for more production, easing concern about oversupply.

The quick movement of the markets was underestimated by Goldman Sachs, who in turn increased its forecast for Brent oil, showing that prices could reach $82.50 per barrel by the summer of this year.

On the other commodity markets, the gold lost 0.08% of its value to 1,319.80 USD per ounce due to the slight strengthening of the USA dollar on Tuesday.

"There's no stopping us and Opec's frustration levels are going to grow", said Philip Streible, senior market strategist at RJO Futures in Chicago, referring to efforts by major producers to curb output since a year ago. In addition, U.S. production reached 10 million barrels per day for the first time since 1970.

For the record, the Islamic republic is allowed to pump up to 3.8 million barrels per day (bpd) under the cutback deal, and Zanganeh said his country could produce about 100,000 bpd more.

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"The market switched from backwardation to contango in the crude oil curve today. that's a situation that implies weakness; it's a situation that, if it persists, will lead to an increase in storage", said Bob Yawger, director of energy futures at Mizuho in NY.

U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.

The commodity's prices were down in the market today extending their prior loss from the previous trading session. Both the Brent and WTI saw a massive decline as they enter the market this week with a solid 1% decline.

Traders are saying the early price action was related to a drop in the number U.S. rigs drilling for more production and Friday's robust U.S. Non-Farm Payrolls report, which could lead to increased demand.

"The longer the deal goes on, it's going to start falling apart", Patterson said in an interview in Singapore, referring to an output-cut agreement between the Organization of Petroleum Exporting Countries and other producers including Russian Federation.

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