Published: Tue, March 21, 2017
Money | By Oscar Reynolds

Crude oil futures plunge to to Rs. 3165 per barrel

Crude oil futures plunge to to Rs. 3165 per barrel

Oil prices also fell on Monday after reports indicated that OPEC did not cut production as much as originally promised and that US drilling continued to increase. The global crude oil benchmark, the Brent crude has declined by 4.30% to around $50.10 per barrel.

WTI Crude Futures slipped 28 cents at $48.50 per barrel.

In terms of output, the IEA noted that member countries of the Opec oil-producing cartel cut their production for the second month in a row.

Riyadh led OPEC and other producers in December to reach their first deal since 2001 to curtail oil output and prop up weak oil prices which had strained many producers' budgets.

In January, Saudi Arabia used 252,000 bpd of crude oil to generate power, a fall from 353,000 bpd in December as cooling temperatures reduced demand for air conditioning. At the end of past year, they agreed to reduce production to ensure prices would go up.

A poll of market analysts showed on Friday that OPEC will have to extend its oil output curbs beyond June as a revival in crude production outside the group, specifically in the USA, may scupper its efforts to erode an overhang of unused inventory.

Crude oil is likely to continue to drift lower over the near-term if supply continues to increase. Two years ago, analysts assumed that oil prices below $60 would cause a huge decline in shale oil production. As the week ended, Saudi Arabia and Russian Federation sent mixed messages on the future of the production cuts agreed to by the Organization of Petroleum Exporting Countries and 11 other nations.

Baker Hughes reported that in the week leading up to 17 March, US shale companies added 14 oil rigs, increasing the number of operating rigs to 631, the most since September 2015.

Crude oil futures edged lower Monday amid reports that OPEC may extend its supply quota experiment beyond this year.

The refusal by Saudi and Russian energy ministers as well as the OPEC secretary-general to commit to an extension of the OPEC/non-OPEC cuts, a big question for the market as the producers' output curb agreements close in on the half-way mark, continues to cast a shadow over the prospects of a speedy draining of oil inventories and an accelerated rebalancing of the market.

OPEC next meets to decide output policy on May 25 in Vienna.

As populist candidates and parties continue to perform well in elections across Europe and the USA, the impact this shift will have on the workings of the world economy still remain unclear.

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