Oil Loses Momentum on Concern over Supply That Citi Sees Easing

A pump jack used to help lift crude oil from a well in South Texas’ Eagle Ford Shale formation stands idle in Dewitt County Texas

Saudi Energy Minister Praises OPEC Oil Price Boost

So even as Saudi Arabia is calling on OPEC to extend its production freeze agreement, traders are becoming increasingly concerned Riyadh is losing control of the global energy market.

It committed to pump no more than 10.058 million barrels a day, as Opec and other major producers sought to rein in global oversupply and support prices.

This is the third consecutive week the oil companies are hiking their prices. It estimates commodity assets under management grew about $45 billion in the first two months of the year but gave up $35 billion during the selloff in raw materials in March. Supply from the 11 Opec members with production targets fell to 29.761 million bpd, implying a compliance of 104 per cent. In London, however, June Brent crude LCOM7, -1.07% on the ICE exchange fell by 11 cents, or 0.2%, to $55.25 a barrel.

Cost of the United States light crude oil decreased $0.43 to stand at $52.75, while price of the Brent crude oil fell $0.46 to trade at $55.43.

While trading was subdued, the focus was on indications that shale oil output in the United States was pushing higher.

USA oil rig activity increased for the 14th straight week last week, the highest since April 2015.

"All the signs of an ever-growing bull market are starting to fade away, (with) Libya and geo-political tensions easing, but also because the Texans are back and they are pumping like there's no tomorrow", said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

"It seems that the optimism in the oil market we have seen since the last few days of March is running out of steam", wrote Tamas Varga, PVM Oil Associates analyst, noting concerns about the "ever-increasing rise" in USA shale output.

Last week's numbers showed USA output helped boost crude inventories to record highs, feeding concerns about a global glut.

Crude output at major USA shale plays is forecast to climb to 5.2 million barrels a day in May, the highest since November 2015, according to the EIA's monthly Drilling Productivity report. Iran fed hopes that OPEC and non-OPEC producers would extend the cuts, but Saudi Arabia's energy minister said it was too early to discuss an extension. Consequently, the country lost its status as Africa's top oil producer to Angola, according to latest data from the Organisation of Petroleum Exporting Countries (OPEC).

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