Oil price slides on prospect of rising US production

Oil prices fell on Wednesday on expectations that US producers would boost output.

Brent crude futures, the international benchmark for oil prices, were down 82 cents $54.65 a barrel at 1008 GMT.

US West Texas Intermediate (WTI) crude oil futures were trading down 80 cents at $51.68 per barrel.

US shale production is set to snap a three-month decline in February, the US Energy Information Administration said on Tuesday, as energy firms boost drilling activity with crude prices hovering near 18-month highs.

February production will edge up 40,750 barrels per day (bpd) to 4.748 million bpd, the EIA said. In January, it was expected to drop by 5,900 bpd.

“It’s the eternal question about the current flat price and what it does to US crude oil production,” Petromatrix oil strategist Olivier Jakob said.

Representative Ryan Zinke of Montana, President-elect Donald Trump’s nominee for interior secretary, on Tuesday said he would consider an expansion of energy drilling and mining on federal lands but would ensure sensitive areas remain protected.  

OPEC output cut 

Oil has drawn support from top crude exporter Saudi Arabia’s commitment to cut output under the agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other producers.

A committee responsible for monitoring compliance with the agreement meets in Vienna on January 21-22.

Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.

The output cuts agreed by OPEC and others are likely to come largely from field and refinery maintenance, BMI Research said in a note. It said oil producers are expected to use lower volumes needed for domestic power generation in a bid to maintain export volumes.

“Sticking to output targets is important but export volumes from the participating countries are a much better indicator of how the cuts will affect the market,” it said.

“Participating members are keen not to sacrifice vital export revenue so are trying to find ways to limit domestic crude usage in order to prioritize filling their contracts to foreign refiners.”

OPEC’s monthly oil markets report will be released later on Wednesday.