Oil rises slightly after Saudi says it will make significant cuts

Oil rises slightly after Saudi says it will make significant cuts

Oil rises slightly after Saudi says it will make significant cuts

Kazakhstan is a party to the original production agreement struck by OPEC and 11 non-OPEC producers past year, committing to shave off 20,000 bpd from its total daily production. "What we can influence as oil producers is the fundamentals, the level of supply which will result in drawing down the inventories".

"Crude oil is still struggling to rebound", said Olivier Jakob, strategist at Petromatrix, adding that OPEC's gradual approach to rebalancing was giving USA producers time to drill new wells that were undermining the impact of the group's cuts. U.S. West Texas Intermediate (WTI) crude futures gained 30 cents, or 0.7 percent, to $46.13, having peaked at $46.71.

As OPEC limits supply, America is simply grabbing a larger share of the market. USA oil and gas exploration and production analyst Gabriele Sorbara of Williams Capital said in a recent interview with TheStreet that oil names have been trading out-of-favor and will likely continue to do so over the next few months.

A sign of ample supplies is the Brent forward curve, which is in a shape known as contango, in which crude for delivery in half a year's time is around $1.50 per barrel more expensive than that for immediate dispatch, making it profitable to charter tankers and store fuel instead of selling it for direct use.

The output increases come even as the cartel is trying to convince market participants that its cuts are reducing the size of a glut that has weighed on the market for almost three years.

Bearish sentiment has taken hold of crude oil prices as various analysts and agencies have slashed their forecast for this year and next.

Some members of the oil cartel such as Libya and Nigeria are exempted from the cuts. Seasonally, Saudi Arabia's exports are lower over the summer when its domestic demand for power peaks.

Oil prices were trading lower this afternoon.

Asked when oil prices may begin to serve as a drag on markets, Kinahan said, "You start getting to 44.5 and that opens up 40 quickly".

The last time this happened, in mid-2014, preceded a massive selloff in oil that dropped Brent from $108 a barrel to about $47 a barrel in the span of five months. Last week, Baker Hughes reported 11 additional rigs operating in the USA, up 513 from this time previous year.

OPEC chatter tends to emerge when oil prices are under strain. Russia also has favorable tax regimes and exchange rates (Russian company expenditures are in Russian Rubles, but oil sales are in U.S. Dollars) that resulted in record levels of Russian petroleum production in the second half of 2016.

Oil prices continued to gain ground during the U.S. session on Monday, but were unable to sustain the best levels with WTI hitting selling interest above the $46.50 p/b level.

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