Crude Prices Fall on Fears Over U.S. Shale Output
January 18 2017 - 10:40AM
Dow Jones News
By Neanda Salvaterra and Stephanie Yang
Crude prices fell Wednesday, weighed down by a stronger dollar
and concerns that rising U.S. shale production may offset a move by
major producers to cut global supply.
Light, sweet crude for February delivery was recently down 99
cents, or 1.9%, at $51.49 a barrel on the New York Mercantile
Exchange. Brent, the global benchmark, was recently down $1.05, or
1.9%, at $54.42 a barrel.
The Wall Street Journal Dollar Index, which tracks the dollar
against a basket of other currencies, rose 0.4% to 91.32 Wednesday.
As oil is priced in dollars, it becomes more expensive for holders
of other currencies as the U.S. currency appreciates.
On Wednesday, the monthly oil market report from the
Organization of the Petroleum Exporting Countries showed a decline
in total output in December, following the deal to limit production
in November. However, analysts said the cartel could face
challenges in cutting back enough to rebalance the supply glut that
had sent prices tumbling.
"Even by their own numbers, they don't really see this cut
getting us back to a normal level for global oil stocks," said
Robbie Fraser, commodity analyst at consultant Schneider Electric
SA in Louisville, Ky. "If OPEC doesn't believe they can get the
deal done, then who's going to?"
While production from OPEC has fallen, climbing output from
countries such as Iraq and Libya have raised concerns about the
sustainability of the deal and its boost to oil prices.
Investors are getting jittery about reports of rising U.S. shale
oil production that could wipe out the price gains made since the
OPEC deal.
OPEC and other producers' decision to reduce output by nearly
1.8 million barrels a day has supported crude prices and prompted
U.S. producers to increase shale output, which now surpasses the
volume that Saudi Arabia, the world's top crude exporter,
previously committed to cutting.
Earlier in the week, the U.S. Energy Information Administration
projected that shale oil production would increase to 4.75 million
barrels a day in February. The body also revised upward its shale
oil production numbers for January to 4.71 million barrels a day
from 4.54 million.
"This confirms that U.S. shale oil production has bottomed out,"
Commerzbank analysts said in a note. The shale ramp up will make it
harder for OPEC to rebalance oil markets, they added.
Traders are awaiting inventory data from the American Petroleum
Institute on Wednesday, as well as official data from the U.S.
Energy Information Administration on the amount of oil in storage,
scheduled for release on Thursday.
"The market's looking for something to grab onto," said Ric
Navy, senior vice president for energy futures at RJ O'Brien &
Associates.
Gasoline futures fell 2.4% to $1.5622 a gallon, and diesel
futures lost 1.6% to $1.6228 a gallon.
Benoit Faucon contributed to this article.
Write to Neanda Salvaterra at neanda.salvaterra@wsj.com and
Stephanie Yang at stephanie.yang@wsj.com
(END) Dow Jones Newswires
January 18, 2017 10:25 ET (15:25 GMT)
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