Oil prices fall as U.S. output hits record high – TheNigerialawyer

Oil prices fell on Thursday, pulled down by record U.S. crude
production that led to a surge in stockpiles.

Spot Brent crude oil futures were at 71.81 dollars per barrel at
0655 GMT, 35 cents, or 0.5 per cent, below their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 27
cents, or 0.4 per cent, at 63.33 dollars per barrel.

“Crude oil prices fell sharply as stockpiles in the U.S. rose to
their highest level since 2017.

“This comes as U.S. refineries head into the spring maintenance
period, stoking fears that crude oil demand will be soft and
stockpiles will continue to rise,” ANZ bank said on Thursday.

U.S. crude stockpiles last week rose to their highest since
September 2017, jumping by 9.9 million barrels to 470.6 barrels, as
production set a record high of 12.3 million barrels per day (bpd),
while refining rates fell, the Energy Information Administration
(EIA) said on Wednesday.

Outside the United States, however, oil markets remained tight
amid the political crisis in Venezuela, tighter U.S. sanctions
against Iran that allow no more exemptions from May, and as the
Organization of the Petroleum Exporting Countries (OPEC) continues
to withhold supply in order to prop up prices.

Oman’s energy minister Mohammed bin Hamad al-Rumhy said on
Wednesday it was OPEC’s goal to extend the cuts, which were started
in January, when they next meet in June.

Despite the desire of many OPEC members to keep withholding
supply to prop up the market, the group may be forced into
action.

“The Venezuelan situation will likely loom large in OPEC
deliberations as ministers weigh how many additional barrels may be
needed to fill an expanding supply gap that is being driven by
geopolitics as opposed to geology,” Canadian bank, RBC Capital
Markets, said.

Beyond Venezuela, analysts at Fitch Solutions also warned of
risks to supply from Libya, where a civil war is threatening to cut
oil fields off from markets.

“The risks here are not inconsiderable, in light of rising
instability in a number of key producers, notably Libya and
Venezuela,” Fitch Solutions said.

For producers, the tight market conditions mean higher
profits.

Analysts at Bernstein Energy said current price levels reflected
the average marginal cost for most listed oil producers.

“We have surveyed the 50 largest listed oil and gas companies
globally … Based on 2018 annual reports we estimate that the global
marginal cost of oil remained stable at 71 dollars per barrel,”
Bernstein said in a note on Thursday.

“This is on line with current spot prices but higher than the
long-term oil forward strip price of 61 dollars per barrel,” the
note said.

“With oil prices rising more than costs, industry margins
increased by more than 200 per cent in 2018,” Bernstein said,
resulting in industry profitability “at the highest in the last 5
years”

NAN

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