Oil prices continue sliding as production limit optimism fades


Oil prices also fell on Monday after reports indicated that OPEC did not cut production as much as originally promised and that US drilling continued to increase.

U.S. West Texas Intermediate and worldwide Brent crude oil finished slightly better on Friday, but light volume held the market in a tight range. On the New York Mercantile Exchange, West Texas Intermediate futures were trading.

OPEC sources told Reuters in February that the group could extend the supply-reduction pact, or even apply deeper cuts from July, if inventories fail to drop to a targeted level.

"This unwinding of position is both a cause and reflection of the big fall in crude oil prices when the cracks in the OPEC/non-OPEC deal emerged and when it seems like it became evident shale oil is back and the new swing player", said Greg McKenna, chief market strategist at brokerage AxiTrader. While Saudi's output is still lower than its target, a rebound in its production dented sentiment in the oil market.

The deal has lifted oil prices, but inventories in industrial nations are rising and higher returns have encouraged USA companies to pump more.

Oil prices were almost unchanged last week as the Opec and IEA monthly reports gave mixed set of signals.

Josh Stevenson, an analyst who provides market analysis on Lionexo observes that "he fact that there is yet to be a marked "correction" in the supply-demand dynamics of oil made it hard for OPEC's cut to make much of a positive difference in triggering an increase in oil prices". It also expects the cartel to maintain its agreed six-month production quota at around 32.5m barrels per day (bpd) for the rest of the year.

OIL prices traded little changed last Thursday, as support from a weaker dollar was offset by a stubbornly high level of U.S. inventories near record highs that suggested Opec-led output cuts were starting to drain supplies. Production peaked in mid-2015 and fell by more than 1 million barrels per day by mid-2016.

The total rig count is still 978 from its peak before the impact of the oil crash hit drillers, but that gap continued to shrink last week.

Saudi's demand for oil products declined to 1.959 million bpd in January to from 2.21 million bpd the month before.

The first issue that has dragged oil prices down is that US inventories have continued to rise year to date. "As such, average oil prices for 2017 are not expected to exceed $60 per barrel".

In other related vegetable oils, soybean oil on the Chicago Board of Trade climbed as much as 0.9 percent, while the September soybean oil contract on the Dalian Commodity Exchange rose up to 0.8 percent.