The Organization of Petroleum Exporting Countries was known to be exerting extra efforts since November last year in the hopes to driver oil prices higher, while decreasing oil supply to balance out the market. However, due to the continuously increasing shale inventories from consumer countries, this effort seems to have little effect towards OPEC’s goal to at least achieve a $60 per barrel price range.
On Monday, oil prices continue to plunge as the threat of US oversupply continues. Crude oil is again below $50 per barrel in recent trading. WTI Crude Oil (Nymex) was down $0.73 or 1.50% to $48.05 per barrel, while benchmark Brent crude also fell 1.16% to $51.16 per barrel. Natural gas also declined on Monday by 1.19% to $2.91/MMBtu.
Despite high compliance rate show from countries who agreed with the OPEC output deal in November, the organization will still see difficulties in achieving their target in surging oil prices to at least the $60 per barrel level, given the surging stockpiles in the US. During the months January and February, OPEC reported compliance rate over its deal for over 90%.
Should OPEC fail to see desired results after the six-month span of the output cuts, it is likely for OPEC to extend the production cuts. OPEC meets in Vienna on May 25 of this year to assess the effectiveness of the deal.
“While oil prices are expected to recover toward the end of the year, they will remain in the $50 - $60 band given the high level of stocks. We expect OPEC to maintain the agreed production quota at around 32.5 million barrels a day for the rest of the year,” said Apicorp, an energy lender company.
Even though oil prices have been rallying in the market recently, reaching a high of $54.94 during the last week of February, the energy product plunged back to the bear market around the midweek of March to as low as $47.09 per barrel for crude oil.
In recent weeks, oil futures’ relative strength index has reached level 26.8724, reaching below 30, indicating an oversell status in the market.
Since the oversupply of shale inventories, investors have been a bit uncertain over oil futures, sending prices to plunge even further down.
Last week, US oil production reported an additional 14 rigs to the inventory, adding up to a total of 631 oil rigs, which was the most since September 2015.
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