Oil settled below $52 a barrel in New York, more than a $1 lower than where it ended a week ago after Opec and its allies announced output cuts, as traders weighed incremental US shale growth against softer demand for 2019.
Saudi Arabia’s plan to slash exports to the United States next month is shoring up expectations that the Organisation of Petroleum Exporting Countries and its partners will deliver on last week’s promise to curb production by 1.2 million barrels per day (bpd). Yet, the oil market appears to have largely ignored cuts agreed to just a week ago, concerned by the relentless growth from US shale, which veteran crude trader Andy Hall says is making it hard to predict the market’s direction.
“The market may have to wait for Opec to get the job done this time, given the perception that Opec+ was unable to cut enough to reduce the surplus expected,” said Michael Cohen, head of energy markets research at Barclays Plc in New York.
Crude has traded in the narrowest range since early 2017 so far this month as investors assess the production cuts pledged by the so-called Opec + coalition. The International Energy Agency (IEA) said unplanned outages in Opec’s member states may double its intended curbs. Still, the market is concerned that breakneck production from the Permian of West Texas and New Mexico and North Dakota’s Bakken shale fields may quash any price rallies.
“We really had a blowout day yesterday with the strong rally,” said Bob Yawger, director of the futures division at Mizuho Securities USA. “I don’t think the headlines supported it so today’s move is more so a pullback to compensate.”