..As OPEC Moves To Avert Energy Crises
Oil prices slipped again on Friday, extending a steep fall from the previous session on surging U.S. output and an expected supply increase from OPEC and putting crude on track for a second week of declines.
Brent crude oil futures were at $70.56 per barrel, down 19 cents, or 0.3 per cent from their last close, while the U.S. West Texas Intermediate, (WTI) crude futures were down 7 cents, at $61.74 per barrel.
Both crude futures lost almost 3 per cent in value the previous session.
“Oil prices have fallen as the pressure of record U.S. output levels continues to weigh,” said Mihir Kapadia, chief executive officer of Sun Global Investments.
U.S. crude oil production reached a record 12.3 million barrels per day (bpd) last week , rising by around 2 million bpd over the past year. U.S. crude exports broke through 3 million bpd for the first time this year, according to data from the Energy Information Administration.
Analysts say U.S. supply will rise further as its export infrastructure is improved.
“One of the things that we can see in the near future is the de-bottlenecking of the Permian basin in the U.S. through new pipelines and export capacity. This will connect the world’s largest shale basin to the global oil market,” said Will Hobbs, chief investment officer for Barclays Investment Solutions.
Rising U.S. oil production has helped offset some of the disruptions from U.S. sanctions against Iran and Venezuela, and from supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC), which started in January.
Despite these disruptions and sharp oil price rises in the first months of this year, some analysts say the long-term price risk to crude oil is skewed to the downside.
Erik Norland, senior economist at commodity derivative exchange CME Group, said “the 130 per cent rise in U.S. production due to the shale oil revolution” during the past decade had created a strong and constant downside risk to oil prices, which was visible in exchange trading positions.
“Observers of the oil markets might be surprised to discover that during the past decade, out-of-the-money (OTM) put options were more expensive than OTM calls 92.5 per cent of the time for crude oil,” he said.
“In other words, oil traders have spent much more time during the past decade worried about downside risks than prices heading higher,” Norland added.
Meanwhile, OPEC is determined to avoid a global “energy crisis” as some of its members are facing international sanctions and others struggling with unrest, its secretary-general said in Tehran on Thursday.
“As an organisation, we will remain focused on our goal of avoiding an energy crisis that may affect the global economy,” Mohammed Barkindo said on the sidelines of an oil and gas exhibition.
The Organisation of the Petroleum Exporting Countries, OPEC , will pursue this policy “despite current troubles in several of its member countries,” he said.
His comments came as the end of US sanction waivers for purchases of oil from key OPEC member Iran was due to kick in on Thursday.
Venezuela, another cartel member, is also facing sweeping US sanctions and in the throes of political troubles while fighting rages between rival forces for control Tripoli, capital of oil-rich Libya.
Barkindo did not name any country but said some OPEC producers were “currently under unilateral sanctions” — a reference to Iran and Venezuela.
Another country “is also going through transitional challenges with all its potential consequences,” Barkindo said, also apparently about Venezuela where opposition leader Juan Guaido is trying to rally demonstrators against President Nicolas Maduro.
Another cartel member he said, alluding to Libya, “is fighting day in and day out to avoid an all-out war”.
OPEC is “committed to stay united” and “not slip back into the chaos” it has faced in recent years, Barkindo said.
Iran, as a founding member of the organisation, has regularly slammed some of the cartel’s members for going along with Washington’s policies against Iran and lacking solidarity.
On Wednesday, Iran’s oil minister Bijan Namdar Zanganeh accused OPEC members he did not name of sowing “division” and threatening the cartel’s “disintegration”.
These countries he said referring to Iraq and oil kingpin Saudi Arabia were “exaggerating” their production capacity to reassure markets after the US lifted sanction waivers for buyers of Iranian crude.
The end of the exemptions announced on April 22 have sparked fears of supply shortages and pushed prices up.