Oil prices decline for third consecutive on the background of statements by Saudi Arabia and Russia’s readiness to increase production, a new jump in drilling activity in the US and a record year of sales of hedge funds in the futures market.
To 13.55 GMT on Monday July contracts for Brent sold at 75,23 per barrel, losing another 1.5% compared to the close of trading last week.
For three days, the price of North sea grades fell nearly 5 dollars or 6.2%. The us benchmark WTI fell by 1.83% on Monday and nearly 9% compared to the peaks, shown a week ago, before 66,64 dollars per barrel. The policy of OPEC and Russia to cut production by 1.8 million barrels a day was the main factor of growth of oil prices in the last 1.5 years, and if the decision to reject it will be approved at the next meeting of the cartel in June, the concern among investors in the commodities market will continue to grow, said Bloomberg analyst at Rakuten Securities in Tokyo Satoru Yoshida.
Large speculators initially did not believe in leap Brent above $ 80 in advance and prepared to roll back: for the week ended may 22 hedge funds sold on the stock exchange ICE contract for 48 million barrels.
Of these 34 million barrels were sold to close bets on the increase in prices, and another 14 million – made a new “short positions”, making a profit at lower prices.
The $ 80 per barrel is likely to remain an insurmountable obstacle for the near future, said Commerzbank analyst Carsten Fritsch. Decrease in quotations will proceed and return of Brent to the levels of late April – 73-74 dollar, predicts PSB.
Russia and Saudi Arabia will offer member countries of the OPEC deal to increase production by 1 million barrels a day, told Reuters sources familiar with the negotiations. Almost as (1.1 million barrels), according to a forecast by the us Department of energy, to grow production in the United States.
Last drilling activity in major shale basins again jumped to the highest level since March 2015, and the number of active drilling rigs increased by 15 units (up to 859).
“Us shale is experiencing a new Renaissance thanks to current oil prices,” – says the analyst “Aton” Alexander Kornilov: simultaneously with the production of rising us oil exports, while the traditional providers are under pressure to sell their varieties at great discount prices.
In early may, the Russian Urals discount to Brent reached 3.6 per dollar – a record level in January 2016, while Kazakhstan grade CPC Blend fell to the lowest level since mid-2012.
The growth of exports from the U.S. to more than 2 million barrels a day led to a glut in some markets if sanctions against Iran will not be imposed, the quotes may fall to $ 20, told Reuters trader of Chinese non-state oil refining company.