U.S. oil production could reach all time high during 2017

The OPEC logo is seen outside their headquarters in Vienna

Oil prices extended losses on Friday to hit a three-week low, after rising US production and President Trump's withdrawal from the Paris Climate Accord overrode the fall in crude inventories there.

Global benchmark Brent crude futures LCOc1 were down 39 cents, or 0.77 percent, at $50.25 a barrel at 0039 GMT.

"Now that U.S. President Trump has announced that the U.S. will be withdrawing from the Paris Climate Agreement, it is expected that the U.S. will expand its oil production even more sharply", said analysts at German bank Commerzbank.

"This could lead to a drilling free-for-all in the USA and also see other signatories waver in their commitments", said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

Crude oil prices continued to trend higher for the second consecutive fortnight in a row. While U.S. government data released on Thursday showed that crude inventories fell twice as much as forecast last week, rising exports and production suggest the glut is lingering.

A week ago, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC members met in Vienna to roll over an output cut deal to reduce 1.8 million barrels per day (bpd) until the end of next March.

The Financial Times on Friday reported that Igor Sechin, chief of Russia's largest oil producer Rosneft, said USA oil companies could add up to 1.5m b/d to global output next year, countering production curbs by Opec and producers outside of the cartel.

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"The lack of moderation in US production is undercutting OPEC efforts to manage the market", said Michael McCarthy, a chief strategist at CMC Markets in Sydney.

Oil prices are down some 10 per cent since OPEC's May 25 decision to extend the cuts.

It's no wonder, then, that global oil prices have remained subdued and even announcements like the 6.4-million-barrel draw in US oil inventories that the EIA announced yesterday have failed to have any impact.

Sechin, a close ally of Russian President Vladimir Putin, expects shale oil output to rise by about 1.5 million barrels per day next year, near the cut targeted by OPEC and its allies. All this growth stems from shale drilling, as the more modest growth from Gulf of Mexico deepwater fields is offsetting declines from other USA conventional oilfields. "But crude production is slowly but surely going to neutralize the (OPEC-led) production cut", said Sukrit Vijayakar, director of energy consultancy Trifecta.

Analysts said the group is at risk of losing further market share to United States shale oil producers, which could cause compliance with the deal to slip in the second half of the year.

The post Trump drags oil prices below $50 appeared first on Vanguard News.

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