Published: Tue, March 14, 2017
Business | By Sandy Mccarthy

Oil prices drop as hedge funds head for the exit: Kemp

Oil prices drop as hedge funds head for the exit: Kemp

Russia's oil giant Rosneft sees a lack of will among the main signatories to the OPEC/non-OPEC deal and US shale production as the main risks to a possible extension of the global supply cut deal, a Rosneft spokesman told Reuters on Monday.

OPEC and non-OPEC countries made a strong start to lowering their oil output by nearly 1.8 million barrels per day by the end of June, but so far the move has had little impact on inventory levels.

Optimism about an agreement between the Organization of Petroleum Exporting Countries and some non-OPEC producers to cut output is fizzling as stockpiles continue to climb and US drilling rigs are returning at the fastest rate since 2012.

Light, sweet crude for April delivery settled down 9 cents, or 0.2%, at $48.40 a barrel on the New York Mercantile Exchange, closing out the sixth consecutive session of losses.

Meanwhile, Kuwait's Oil Minister Essam al-Marzouk reportedly has said the country supports extending the current OPEC oil production cut beyond its June deadline.

Brent Crude tumbled 0.8% to $50 per barrel. USA oil futures traded as high as $48.68 a barrel earlier in the session.

The breakdown of the $50 a barrel level is not a good sign for Saudi Arabia and the OPEC. Prices slid 8.1% last week.

Futures in NY headed for a sixth day of losses, dropping as much as 1.2 per cent after falling 9.1 per cent last week.

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"All of us realise that such an expanded network of producers with a larger share of global production is the only way to achieve a constructive, stable market for all", Falih told oil executives in Houston.

Since last Monday, the price of oil has fallen by more than eight per cent, marking its biggest week-on-week drop in four months.

That was the day OPEC announced lower production targets for the first half of 2017, sending crude prices hurtling higher.

Oil prices were put under further pressure at the end of last week, when energy services firm Baker Hughes reported USA drillers added oil rigs for the eight consecutive week.

Meanwhile, the U.S. Energy Information Administration said on Wednesday that crude supplies jumped by 8.2 million barrels last week to yet another all-time high of 528.4 million.

The deal between Opec and non-Opec producers, which was agreed late previous year and aimed to curb production, appears to be having little effect on the glut at the moment, with three of the last four weeks showing substantial inventory increases.

"It will be interesting to see how OPEC rhetoric will evolve with this price correction".

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