Oil Falls for Third Day over Rising US Shale Output
Crude oil prices dropped for a third day from close to two-year high yesterday as rising United States output hampers efforts by the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC to cut output and rebalance the oil market.
Traders and investors have reportedly questioned how much the prospect of further rises in United State output might overshadow some of the optimism that OPEC-led production cuts would tighten the balance between crude supply and demand.
The US shale output for December is set to rise for the 12th straight month and Fitch Ratings said in its 2018 oil outlook that oil prices above $60 per barrel may not be sustained.
Brent crude futures were last down at $62.82 a barrel yesterday, while US West Texas Intermediate (WTI) futures fell to $56.49.
Both benchmarks early in the previous week hit high last seen in 2015, but Reuters quoted traders as saying that the market had lost some momentum since then.
Traders said they were cautious about betting on further price rises.
This sentiment comes in part on the back of rising U.S. oil output C-OUT-T-EIA, which has grown by more than 14 percent since mid-2016 to a record 9.62 million barrels per day (bpd).
The US government said on Monday that the US shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd.
Fitch Ratings said in its 2018 oil outlook that it assumed 2018 “average oil prices will be broadly unchanged yearon-year and that the recent price recovery with Brent exceeding $60 per barrel may not be sustained”.
So far, in 2017, Brent has averaged $54.5 per barrel.
Despite the cautious sentiment, traders said oil prices were unlikely to fall far, largely due to supply restrictions led by the OPEC and Russia, which have helped reduce excess stockpiles.