Oil slips as rising output faces weak demand and worries

May 1, 2017 1:12PM CDT

Oil slipped more than 1 percent on Monday as rising crude output from Libya, hitting its highest production since 2014, and increases in U.S. drilling countered OPEC-led production cuts aimed at clearing the oil supply glut. Signs of slower than expected manufacturing growth in China, and a weaker figure for U.S. manufacturing sentiment also weighed on expectations for oil demand and the overall market.

U.S. crude has lost nearly 9 percent since April 11, weighed down by the markets impatience with the slow pace of inventory draw-down around the world. This is an issue even after major oil producers agreed late last year to cut production by 1.8 million barrels per day for the first half of 2017. The Organization of the Petroleum Exporting Countries and participating non-OPEC countries meet on May 25 to discuss whether to extend that reduction. Given that inventories remain high and prices are half their mid-2014 level, OPEC members including Saudi Arabia support prolonging the curbs.

Libya’s National Oil Company said production has risen above 760,000 bpd, highest since December 2014, with plans to keep boosting production. That OPEC member had been excluded from production cut estimates because armed conflict had sapped overall production. With the overall bearish fundamental news, traders should not be over committed to selling the market. The market is oversold and we should see a decent bounce before the week is over.

 

Jun '17 Crude Light Daily Chart

Crude Light Daily Chart


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