The oil falls on an increase in US production, set for the second week of decline

SINGAPORE (Reuters) – Oil prices fell on Friday, extending the sharp decline recorded by the previous session on rising US production and the expected increase in producers' club supply. OPEC, and oil remaining on track for a second week of decline.

Brent crude futures were at $ 70.56 per barrel at 0127 GMT, down 19 cents or 0.3% from their last close.

Futures on US crude WTI (West Texas Intermediate) fell 7 cents to 61.74 dollars a barrel.

The two crude futures contracts lost nearly 3% in value during the previous session.

"Oil prices have come down, as record production pressure in the United States continues to weigh," said Mihir Kapadia, chief executive of Sun Global Investments.

US crude oil production reached a record 12.3 million barrels per day (bpd) last week, with an increase of about 2 million bpd over the past year. US crude exports exceeded 3 million bpd for the first time this year, according to data from the Energy Information Administration. Chart: png crude oil production in the United States, click on tmsnrt.rs/2VFPX81

Analysts believe the US supply will increase as its export infrastructure improves.

"One of the things we can see in the near future is the decongestion of the Permian Basin in the United States through new pipelines and export capacity. This will connect the world's largest shale basin to the global oil market, "said Will Hobbs, chief investment officer of Barclays Investment Solutions.

Increased oil production in the United States has helped mitigate some of the disruptions resulting from US sanctions against Iran and Venezuela, as well as supply cuts led by the producer club. of the Organization of the Petroleum Exporting Countries (OPEC) dominated in the Middle East, which began in January.

Despite these disruptions and the sharp rise in oil prices in the first few months of this year, some badysts believe that the long-term price risk for crude oil is skewed downward.

Erik Norland, a senior economist at CME Group, a commodity derivatives exchange, said that "the 130% increase in US production due to the oil shale revolution" had created a significant and constant downside risk for oil companies. oil price, which was visible in foreign exchange operations. positions.

"Oil market watchers might be surprised to discover that over the past decade, out of the money (OTM) put options were more expensive than OTM calls in 92.5% of the world's markets. case for crude oil, "he said.

"In other words, oil traders have spent much more time over the last decade worrying about downside risks than higher prices," added Norland.