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London. — Oil prices fell yesterday, pressured by the concern that production cuts by the world’s big exporters may not be enough to drain a global glut that has depressed the market for almost three years. Benchmark Brent crude was down 40c a barrel at $51,89 by 8.40am GMT, having gained 14c on Monday. US light crude fell by 20 cents to $49,60.
Oil cartel Opec and other oil producers, including Russia, agreed last week to keep a tight rein on supply until the end of the first quarter of 2018, nine months longer than originally planned.
Collective output by Opec and other producers will be held around 1,8-million barrels a day below its level at the end of 2016.
But the cutbacks have yet to drain inventories by a significant degree and prices fell after the Opec deal was announced.
“Investors haven’t made up their minds if Opec has done enough to balance supply and demand,” said Carsten Fritsch, senior commodities analyst at Commerzbank in Frankfurt.
“Today’s losses follow gains yesterday, so overall oil prices have been rather flat this week.”
Part of the problem for Opec is oil supply in the US, where shale production is booming.
US drillers have added rigs for 19 consecutive weeks to reach 722, the highest since April 2015, according to services firm Baker Hughes.
Goldman Sachs analysts have reduced their forecasts for oil prices, saying that falling US production costs will keep supply rising for years to come.
The bank said that once Opec’s production growth resumed after its self-imposed cuts, US and Opec output would rise by 1 million to 1,3 million barrels a day between 2018 and 2020.
“While we are bullish on near-term prices as inventories normalise . . . 2018-19 futures need to be in the $45-$50 range,” Goldman said.
The US summer driving season, which by tradition started on the Memorial Day holiday on Monday, could offer some support for prices, analysts said.
Demand in the US for transport fuels tends to rise as families visit friends and relatives or go on vacation during the northern hemisphere summer.
The American Automobile Association said ahead of Memorial Day that it expected 39,3-million Americans to travel 80km or more over the Memorial Day weekend, the highest Memorial Day mileage since 2005. – Reuters.
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