Future prices of the U.S. crude have been going through a downward spiral for the seventh straight session on reports of Saudi Arabia increasing its crude output last month.
According to Saudi Arabia they raised output to 10.011 million barrels per day in February – an output that is 2.7 per cent higher than January production. The output may have increased, but it is still well below the 10.05 million-barrel target that the country had agreed to under the production-cut deal reached last year between OPEC and top non-OPEC countries. There have been other reports that claim that the Saudi oil production has in fact dropped by 68,100 barrels a day to 9.8 million barrels per day.
These reports of decline in production didn’t affect the decline in U.S. crude prices as they closed down 1.4 per cent to $47.72 a barrel, their lowest levels since late November. Late trading did see a surge in prices after American Petroleum Institute reported a decline of 531,000 barrels in U.S. oil inventories last week, which was in contrast to analyst reports that predicted a massive 3.5 million barrel surge in production.
Stock market isn’t favoring the oil majors right now with Dow Jones industrial average component Exxon Mobil (XOM) shares dipping by 0.5 per cent to 80.99. Chevron (CVX) saw a decline of 1.8 per cent to close at 107.36, hitting a four-month low and testing its 200-day line. BP (BP) also saw a decline of 1.9 per cent, while Royal Dutch Shell (RDSA) slid 2 per cent.
There was a closed door meeting between Saudi officials and executives from top shale producers including ConocoPhillips (COP), EOG Resources (EOG) and Occidental Petroleum (OXY) warning producers that they shouldn’t assume the cartel will extend the output cuts.
OPEC has raised the growth forecast for U.S. oil production by up to 100,000 barrels per day and this effective means that there is a strong possibility that increased production will weigh further on crude prices. The bearish signs for oil come as OPEC members start pushing to extend their six-month production deal for another six months.
While Saudi Arabia’s Al-Falih said it was too early to decide on extend the output cuts, Iraq has signaled it wants an extension. And Kuwait’s oil minister said Monday his country wants to extend the OPEC output cuts as U.S. stockpiles rose more than the cartel was expecting, according to the state run news agency Kuna. Iran said Tuesday it would stick to its end of the production deal, if the rest of OPEC does as well.