Oil jumps 1% on weaker dollar, but rise in United States drilling drags

Oil jumps 1% on weaker dollar, but rise in United States drilling drags

This excerpt is from a report that is available to subscribers of Stratas Advisors' Global Hydrocarbon Supply service.

However, he warned, "I'll tell you one thing: in the long run, crude oil is heading egregiously lower".

U.S. shale oil output has risen about 10 per cent since last year to 9.4 million bpd, with the number of United States oil rigs in operation at the highest in more than three years.

Oil prices rose early on Monday, but an increase in US drilling activity stoked worries that a global supply glut will persist despite an OPEC-led effort to curb output.

IN the New York /London market, gold rose last Thursday, rising quietly above the prior session's five-week low as the dollar steadied and the 200-day moving average provided short-term support below the market.

In response, the Organization of the Petroleum Exporting Countries and others including Russian Federation late a year ago agreed to pull back their output by an amount equal to 2% of daily global production.

However, Nigeria and Libya, OPEC members exempt from the cuts, have hiked output.




The remaining 10 OPEC members participated in the deal along with 11 non-OPEC countries led by Russian Federation. Prices are down about 10% this month. The new agreement extends the production deal for nine months until March 2018. Compliance to the first cut was surprisingly high; therefore, we are expecting a decent level of compliance for the second cut period.

West African and European suppliers are already feeling the chill from China's reduced demand, and a global glut has dragged spot prices for crude last week to their lowest since November, 2016. However, the recovery of the US shale production, along with production growth from Iran, Libya and Nigeria, will cancel off part of the cut efforts.

Flynn also said that production shut ins caused by Tropical Storm Cindy last week "should lead to sizable draws" in crude supply.

New York's NYMEХ (New York Merchantile Exchange) is a U.S. futures market founded in 1882.

In refined products, RBOB heating oil futures remained flat at 1.386 a gallon at the NYMEX.

Oil prices inched up on Monday amid anticipation that the oil glut may abate as refineries come back online later this year.

It is unlikely that the struggling oil producers will agree to a deeper cut. The production drop for non-OPEC countries during 2016 mostly came from the USA and China. "The added cooling demand should limit the rate of [U.S.] storage injections in the weeks ahead".

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