Oil Slips as US Stockpiles Set Record Despite OPEC Cuts

03 March, 2017, 01:11 | Author: Elaine Woods

Carole Nakhle, director of the advisory firm Crystol Energy, said, "Under current oil market conditions, OPEC risks losing market share with further production cuts", meaning it's anyone's guess whether the cartel will extend its agreement to the remainder of 2017 - which many members said was possible but not required due to the "success" of the reductions.

Still, oil remained locked within a tight trading range as strict Opec compliance with output cuts offset rising USA oil reserves. OPEC has achieved 86 percent compliance rate on the proposed cuts in January 2017.

Iran's crude oil and condensate exports rose three percent month-on-month in January as it continued to regain market share, widening its appeal among refiners around the globe in the process. The build was largely driven by significant imports from Saudi Arabia, Iraq, and Canada, as well as strong domestic production which rose above 9 million barrels for the second straight week.

Within the deal with OPEC and non-OPEC oil producers Kazakhstan has committed to cut oil output by 20,000 barrels per day from November 2016 level since January 1 2017.

Previous OPEC cuts have been mired in mass cheating by its members, making strong compliance by OPEC this time a positive surprise for the market, with prices trading above $55 per barrel - up from $35 a year ago.

Production has been on an upward trend since hitting a cyclical low of 8.5 million bpd in September ("Weekly Petroleum Status Report", EIA, March 1).

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Kuwait pledged to cut production by 131,000 bpd from a baseline of 2.838 million bpd.

The Labor Department released a report on Thursday showing that first-time claims for USA unemployment benefits fell to their lowest level in over forty years in the week ended February 25th.

One of the main reasons for the increase in output has been a gradual increase in production from the South Azadegan field, in the strategic West Karun region, according to sources and Oil Ministry officials.

Crude oil prices declined in Asian trading on Thursday after the report for an eight straight week of build in US oil stocks, leading USA inventories to stand at the highest level in their history.

Oil prices extended losses Thursday, with bearish sentiment fueled by the latest increase in USA crude stockpiles and production in addition to the strength of the dollar on currency markets. On the contrary, USA crude stocks have risen 39 million barrels this year, to 518 million, since OPEC started cutting production in January.

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