Oil dives as growth in US output outweighs OPEC production cuts

SINGAPORE (Reuters) – Oil prices dipped on Thursday as record US crude output raised concerns over a return to global excess supply, fueling discussions within the US. OPEC that a reduction in production could become necessary again to avoid an overabundance.

Brent crude oil futures in the first month were $ 71.93 per barrel at 00301 GMT, down 14 cents from their last close.

The WTI (West Texas Intermediate) futures price is $ 61.68 per barrel, virtually unchanged since the last settlement.

Benjamin Lu of Phillip Futures' brokerage firm in Singapore said that overall, "oil prices continue to demonstrate … bearish influences in the face of market concerns related to rising global inventories … (and to that) rising levels of production threaten to upset the fundamentals of supply in the fourth quarter of 2018 ".

A group of producers from the Organization of the Petroleum Exporting Countries (OPEC), dominated by the Middle East, as well as Russia, decided last June to ease the production barriers in place since 2017, in the wake of pressure from US President Donald Trump on the reduction of oil prices. supply losses from Iran.

But with Iranian sanctions in place and oil still widely available, OPEC's production cuts next year can not be ruled out, two sources from OPEC said Wednesday.

"The OPEC and Russia could use cuts to support $ 70 a barrel," said Ole Hansen, head of product strategy for Saxo Bank.

"The introduction of US sanctions earlier this week against Iran has not helped lift the market as eight countries, including three of the world's largest importers, would receive waivers allowing to continue buying Iranian crude for up to six months, "Hansen said.

THE ONLY WAY IS IT?

The increase in global production was ruthlessly focused on US crude oil production, which hit a record 11.6 million barrels per day during the week ending Nov. 2, according to Energy data. Information Administration (EIA) released Wednesday.

This is three times higher than the lowest level reached in the United States ten years ago and an increase of 22.2% this year alone. It makes the United States the world's largest producer of crude oil.

More American oil will probably come. EIA predicts that production will reach 12 million barrels per day by mid-2019, largely due to an increase in shale oil production.

At the same time, US crude inventories rose 5.8 million barrels during the week ending Nov. 2, to 431.79 million barrels, the agency said.

Crude inventories returned above their five-year average levels in October.

Production has not only increased in the United States, but also in many other countries, including Russia, Saudi Arabia, Iraq and Brazil, raising concerns of producers as to the reappearance of 39, an oversupply that depressed oil prices between 2014 and 2017.

"Producers worry about potential excess supply … after the EIA announced that crude oil inventories had risen by 5.8 million barrels," said Stephen Innes, Trade Manager for the Asia-Pacific region at Oanda, a futures broker.