Oil prices continue trading near its 2017 lows but did bounce higher early Thursday morning. The price of U.S. crude futures gained around 25 cents a barrel to trade at $42.76, which still marks an approximate 20 percent decline since peaking in February.
Here are two oil-related news reports of interest to investors.
OPEC Is Stuck In A Zero Sum Situation
OPEC and non-OPEC members agreed in June to extend a 2016 agreement, which calls for a collective reduction of 1.8 million barrels of oil per day. The problem is that for every one barrel of oil OPEC agreed to hold back, another oil player somewhere else in the world will make up for.
Incremental production from U.S. shale producers alone could account for 1.5 million barrels of oil per day, Macquarie’s Ian Reid told CNBC Thursday morning.
“That knocks out pretty much all of what OPEC can do and that’s the reason why oil prices are suffering at the moment,” he said. “It’s a zero-sum gain. The more [OPEC tries to] increase the price the more shale producers will continue drilling and fracking.
Be Bearish On Wednesdays?
For the past four weeks the price of oil gets “whacked” on Wednesday, Bloomberg reported.
The Energy Information Administration releases data for U.S. production and inventories every Wednesday and this is now followed up by an average decline of 3.2 percent, or $1.56 per barrel over the past four Wednesday.
The latest round of EIA data showed that U.S. oil production rose to its highest levels since August 2015. Meanwhile, oil inventories are sitting at around 100 million barrels above the five-year average, Bloomberg added.
“There appears to be no topside limit to production in the U.S., or at least it hasn’t been discovered yet,” Edward Bell, an oil analyst at Emirates NBD PJSC told Bloomberg. “The persistent rise in the drilling rig count suggests the market will need to withstand more, not less, U.S. oil in the near term.”