Oil prices fall to 11-day low on US Shale output surge
Crude oil prices fell on Tuesday, hitting their lowest in 11 days as a United States Government report said shale oil output in May was expected to post the biggest monthly increase in more than two years.
At a time when the Organisation of Petroleum Exporting Countries (OPEC) and other producing nations have been trying to cut output, government drilling data showed US shale production next month was set to rise to 5.19 million barrels per day (bpd).
Reuters reported that shale output from the Permian play, the country’s largest shale region, was expected to reach a record 2.36 million bpd.
Global benchmark Brent crude futures fell 11 cents, trading at $55.25 a barrel, while Brent touched $54.76 intraday, its lowest since April 7.
US West Texas Intermediate crude futures rose one cent to $52.66 a barrel, with their intraday low as $52.14, also the weakest since April 7.
The US Energy Information Administration “estimates for a combined 124,000 barrels-per-day growth in US shale production over May have added another bearish element to the market,” Reuters quoted analysts at JBC Energy, based in Vienna, as saying.
More barrels could be on their way to the market from U.S. shale fields as financial companies are investing billions in production, a Reuters analysis showed.
Members of the OPEC are cutting oil production by 1.2 million bpd from January 1 for six months, the first reduction in eight years.
The Energy Minister of the United Arab Emirates said he saw healthy oil demand growth this year and believed inventories would fall, but it would take more time to rebalance the market.
He said “conformity” within OPEC and other producers was improving and that the UAE was complying 100 per cent with its pledge to cut production.
OPEC leader, Saudi Arabia, tightened February crude oil exports to the lowest since mid-2015, official data showed yesterday.
A preliminary Reuters poll showed analysts expected data to show US crude oil stocks fell in the week to April 14, building on a surprise decline the previous week.