Oil down on continued concerns over US output

Darnell Taylor
March 13, 2018

The West Texas Intermediate (WTI) for April delivery was down 0.68 USA dollar to settle at 61.36 dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery lost 0.54 dollar to close at 64.95 dollars a barrel on the London ICE Futures Exchange.

Additionally, new government data showed speculators cut bets on oil, suggesting more selling could be seen over the near-term.

Brent crude futures LCOc1 were at $65.58 per barrel, up 9 cents, or 0.1 percent, from their previous close.

ING's outlook is in contrast to bullish views from Royal Bank of Canada and Goldman Sachs Group Inc.to BMI Research and Societe Generale SA, which see prices supported as strong demand soaks up supply from the U.S. While Patterson does see healthy oil consumption, he said growth may slow and fail to completely absorb gaining American output.

"Rising production and inventory in the United States has been reducing fund sentiment since it peaked at the end of January", ING said in a note.

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Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in nearly two months.

The US economy added the biggest number of jobs in more than 1-1/2 years in February, with non-farm payrolls jumping by 313,000 jobs last month, the Labor Department said on Friday.

Despite the lower rig count, an early indicator of future output, activity remains much higher than a year ago. Only Russia pumps more, at almost 11 million bpd.

"The longer the deal goes on, it's going to start falling apart", Patterson said in an interview in Singapore, referring to an output-cut agreement between the Organization of Petroleum Exporting Countries and other producers including Russian Federation.

Investors are said to be weighing rising US output (which continues to climb even though rig counts were cut slightly last week) and supply against the possibility that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers will maintain its supply cuts this year and possibly even next. Iran wants OPEC to work to keep oil prices at about $60 a barrel as an increase toward $70 will encourage shale oil output, Oil Minister Bijan Zanganeh said, the Wall Street Journal reported.

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