Indications emerge at the global crude oil market on Monday that the recovery efforts induced by cut in production output by organisations of petroleum exporting countries (OPEC) and some non-OPEC producers is under threat.
This is even as oil price hovered around three-month lows on Monday, as rising inventories and drilling activity in the United States, the world’s top energy consumer, offset optimism over OPEC’s efforts to restrict crude output and reduce a global glut.
Experts have therefore stated that the rising U.S. oil output may hamper OPEC and non-OPEC producers from extending production cuts beyond June, hence it might lead to a new price war, Russia’s top oil major told Reuters on Monday.
U.S. shale oil production had been in retreat as oil prices tumbled from above $100 a barrel in 2014 to below $30 in 2015, making costly fracking processes less profitable.
Brent crude futures LCOc1 fell 7 cents to $51.30 a barrel having earlier hit a session low of $50.85, its lowest level since Nov. 30.
U.S. West Texas Intermediate crude (WTI) CLc1 fell 20 cents to $48.29 a barrel, a 0.4 percent loss.
However, Goldman Sachs said in a note to Reuters that it remained “very confident” about commodity prices and maintained its price forecast of $57.50 for WTI in the second quarter.
The slide could be the result of traders unwinding bullish long positions, and could slow as those positions are unwound, Tradition Energy’s McGillian said.