MARKET & ECONOMICSOpec production rises to three-year high

There was some good news when the Department of Energy had said on Wednesday that oil inventories fell 3.6 million barrels in the week ending December 4, a booster for prices as it indicates an uptick in demand.

Up to two million barrels of crude oil are being produced in excess of demand per day, generating a glut that has dragged prices down by nearly 66 per cent since 2014. That is the highest output in over three years and 1.7 million barrels a day over its former production ceiling.

Output from OPEC rose in November by 230,100 barrels per day to a daily total of 31,695 million, which is its highest since April 2012.

“While crude oil price is now hovering at US$40 per barrel, the above projection was for the whole year’s average of 2016 and the price could rebound in the future”, he said. It touched $US1.1956 on Tuesday, the lowest level in more than six years. Expected crude oil production declines through September 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico.

OPEC nations decided Friday to keep producing oil at their current high levels, effectively acknowledging their inability to push up crude prices.

A year ago, Saudi Arabia pushed though an OPEC decision to defend market share instead of cutting output, hoping to slow growth in rival supplies. First, and perhaps most important, is the sudden upsurge of shale oil production in the U.S.by using a technology known as fracking.

But that huge spike in US oil production and reserves broke the OPEC cartel’s manipulative control of production, and the average price of crude oil fell in 2015 to $51 a barrel.

With such a focus being on oil at the moment, U.S. EIA crude oil inventories data this afternoon is likely to be monitored closely. Prices have continued to collapse, falling to .74 recently as OPEC members have panicked and increased production to try to generate enough cash flow to meet debt payments. Gas prices are down 46 percent this year and 84 percent lower than their 2008 peak. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the US Oil may continue lower.

While this gave a slight boost on Wednesday and in early trading in Europe and Asia, bearish investors once again came to the fore in early USA trading hours. It extended its fall in post-settlement trade, striking a new February 2009 low of $39.46 by 4:00 p.m. EST (2100 GMT). The statement said comparable-store sales were down 35.1% quarter-to-date through last week.