Oil slumps to 7-week low on USA inventory data, Saudi comments

The EIA will release weekly data on USA oil supplies Wednesday.

However, the recent increase in the United States imports of Nigerian crude is being threatened as shale oil production gathers fresh momentum on the back of the rally in global oil prices. A sharp rise from the US shale patch could undo the Saudi-led deal to reduce the global oil glut.

“Shale has proven to be remarkably resilient”. Expectations for US LTO are higher than last year’s forecast, thanks to impressive productivity gains. Oil prices jumped from the mid-$40’s to the mid-$50’s within two weeks after the OPEC deal was announced in late 2016.

OPEC’s strategy appeared aimed at drowning American frackers by dropping prices far too low for them to survive on. The U.S. land drilling rig count is up 55 percent in the past 12 months, and many of them are in the Permian.

Russian Energy Minister Alexander Novak said the production deal with OPEC has led to a steadier oil price and less volatility, but Russia has no intention of joining the cartel.

Noting that Indian per capita oil consumption is just 1.2 barrels per year today, the report said the number is expected to reach 1.5 barrels per year by 2022.

But the oil boom didn’t collapse completely. API also reported gasoline supplies decreased by 5 million barrels and distillate inventories decreased by 2.9 million barrels. Late a year ago, OPEC and other oil producing countries agreed to slow down production in an attempt to help the price of oil return to more normal levels. If prices rise more than expected and hit about $80 a barrel, it could rise by 3 million barrels a day. In March 2017, the EIA estimated that the oil production per rig from new wells was 713 barrels per day-about 38.2% higher than in March 2016.

All eyes are on the frenzy of shale activity in the Permian region.

The ministers also discussed potential “oil-for-goods” swaps at the meeting, as well as the progress in implementing the oil production cap agreement.

He said growth in developing nations means that demand for oil will remain strong despite efforts to curb carbon emissions, advances in energy efficiency, and competition from renewable energy.

“The green shoots are here in the USA -maybe they’re growing too fast”, he joked.

On the flipside, a possible extension of the deal – assuming compliance is high and cheating is low – would give more confidence to the USA drillers to increase output at higher oil prices.

USA crude is widely seen as the main headwind for worldwide prices at the moment, and inventory figures, although dismissed by some as irrelevant, are still capable of swinging global markets.