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Published: Wed, February 01, 2017
Business | By Patricia Jimenez

OPEC Succeeding in Oil Production Cuts (USO, UCO)

OPEC Succeeding in Oil Production Cuts (USO, UCO)

Other analysts were not so positive about the level of compliance, and Tamas Varga, analyst with PVM Oil Associates in London, told Reuters today that Petro-Logistics' estimate was "not very encouraging" since it suggests that OPEC has achieved just 75 percent of its supply-cut target.

In the absence of fresh news from OPEC on Monday, traders turned to last Friday's rig count report from Baker Hughes for direction. "U.S. output in 2017 will be 1 million barrels a day higher than past year".

At the same time, oil output in China, which is disproportionately sour, fell by almost 7 percent in the first 11 months of 2016 due to investment cuts, while production in Colombia, another sour crude producer, fell sharply previous year. The Dollar Index, which tracks the value of the U.S. currency against a basket of foreign currencies, was 0.63% higher at the time of writing. The latest figures showed that the number of active oil and gas rigs in the United States increased last week by 18 for a total of 712 active rigs, or 93 rigs above the rig count a year ago.

Overall, the consensus range is from a low of an additional 1.2 million barrels per day being added, to as high as 1.6 million barrels per day. These highs correspond to a 61.8% Fibonacci retracement of the decline from the January 3rd rally peak to the January 10th corrective bottom. The close below this level is giving the market a downside bias. The competing forces have kept oil between $50 a barrel and about $54 a barrel since early December.

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WTI (West Texas Intermediate) crude oil (IEZ) (FENY) (BNO) (RYE) futures contracts for March delivery fell 0.4%. The increasing open interest during the market pullback indicates the move was driven by new money entering the market, a bearish indication.

On January 24, 2017, the API reported that U.S. crude oil inventories rose by 2,927,000 barrels from January 13-20, 2017.

For the week ending January 20, 2017, the EIA reported that U.S. crude oil inventories rose by 2.8 MMbbls (million barrels) to 488.3 MMbbls. This will be followed by the EIA's weekly crude oil inventories report on Wednesday at 10:30 ET.

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