Oil Extends Decline as Rising U.S. Production Weighs

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On Monday, oil prices prolonged declines, pulled down by indications of growing production in the United States that  would partially offset output cuts by the Organization of Petroleum Exporting Countries and other producers.

After President Donald Trump presented immigration curbs that generated criticism at home and abroad, uncertainty over the outlook for U.S policy also broadly influenced  the financial markets.

Oil trading was quiet with some Asian countries, including China, on holiday for the Lunar New Year. After the opening bell on Monday, the delivery of NYMEX crude for March declined 27 cents at at $52.90 a barrel.

Global benchmark Brent crude oil prices declined 25 cents at $55.26 a barrel at 1010 GMT, while U.S. crude futures fell 8 cents to $53.09.

The number of active U.S. oil rigs increased to the highest since November 2015 the previous week, according to Baker Hughes data, indicating  that drillers are taking advantage of oil prices above $50 a barrel.

The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed to reduce production by nearly 1.8 million barrels per day in the first half of 2017 to relieve a two-year supply overhang.

“We are in wait-and-see mode, I suspect at the moment. Oil has reached a fair value equilibrium level given the current supply and demand outlook,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Until we get anything to really disrupt that, we may not see too much change,” he said, adding the market may draw some comfort from official OPEC figures for January production.

However,  U.S. oil output has been increasing, with the International Energy Agency forecasting total U.S. production growth of 320,000 barrels per day (bpd) in 2017 to an average of 12.8 million barrels per day bpd.

“The rise in U.S. output should not be unexpected,” ANZ bank said in a note.

“However, we expect the reductions being made by OPEC will far exceed any rise in the U.S. and quickly reduce the global inventory that has been built up over the past two years,” it added.

Hedge funds and money managers boosted bullish wagers on U.S.crude oil to the highest level since mid-2014, the Commodity FuturesTrading Commission (CFTC) data showed on Friday, as agreed output cuts by the world’s top producers began to eat into a global glut.

In addition, on Sunday, President Donald Trump justified  his move to ban entry of refugees and people from seven Muslim-majority nations and stated the United States would continue issuing visas for all countries in the next 90 days as he faced increasing criticism at home and abroad and new demonstrations in U.S. cities.

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U.S. Natural Gas Declines to 1-Week Low on Bets For Bearish Storage Data

After the opening bell on Wednesday, U.S. natural gas futures dropped for the second day in a row, declining near one week low, as weather predictions for the end of January turned warmer, which should reduce demand for the heating fuel.

In recent weeks, natural gas markets have been volatile, adjusting course quickly in reaction to changing outlooks in near term weather patterns.

After increasing  almost 2.7% to a session high of $3.513 per million British thermal units, a level not seen since January 3, Delivery of Natural gas for February on the NYMEX declined about 3% to a session low of $3.310 per million British thermal units, a level not perceived since January 12.

It was previously at $3.320 by 9:00AM ET (14:00GMT), down 9.2 cents, or about 2.7%, after plunging 0.7 cents, or 0.2%, the day earlier.

In the meantime, market players looked forward to weekly storage data scheduled on Thursday, which is expected to indicate a draw in a range between 220 and 230 billion cubic feet in the week ended January 13.

Which compares with a withdrawal of 151 billion cubic feet in the  preceding week, 178 billion a year before and a five year average decline of 170 billion cubic feet.

Currently, total natural gas in storage stands at 3.160 trillion cubic feet, according  to the  U.S. Energy Information Administration (EIA), 10.3% lower than levels at this time a year ago and approximately 0.1% below the five-year average for this time of year.

On Additional News

Crude oil prices inched higher in Asian trade on inspiring statistics,  which indicated oil production by the OPEC was dropping, pushing the market closer towards a rebalance.  However, any increase could be balanced by the possible expansion in U.S. shale oil output.

On the NYMEX, light, delivery of sweet crude futures  in February CLG7, +1.31%  traded at $51.52 a barrel, up $0.44, or 0.9%, in the Globex electronic session.

March Brent crude LCOH7, +1.52%  on London’s ICE Futures exchange rose $0.49, or 0.9%, to $54.41 a barrel.

According to OPEC’s recent data, the production by the 13-member bloc contracted by 221,000 barrels a day in December from the prior month. Generally, the cartel produced nearly 33.1 million barrels a day in December.

The group still needs to reduce to approximately 31.8 million barrels a day in order to meet the level it promised in its output cut agreement signed the previous year.

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Oil Prices Drop as Increasing U.S. Production Could Offset OPEC Cuts

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On Monday, oil prices dropped as investors anticipate figures from OPEC later this week, which will give additional awareness into demand and supply movements.

On Tuesday, oil markets were mixed, supported by development in U.S. crude output and Saudi Arabia said it would strictly follow to a commitment to reduce production, but held back by doubt in financial markets that glut would be curbed.

In an effort to clear a global glut that has depressed prices for more than two years, The Organization of the Petroleum Exporting Countries (OPEC) has settled to reduce production by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1.

Russia and other key exporters outside the Organization of the Petroleum Exporting Countries (OPEC) have stated they will also cut production.

However, investors have questioned that the Organization of the Petroleum Exporting Countries (OPEC) and its partners can trim production enough to drive up prices.

This Wednesday, January 18, OPEC releases its monthly output data, offering early indications on the agreement  signed late in 2016.

On the NYMEX, delivery of crude oil futures in February declined 12 cents, or 0.2 percent, to $52.25 a barrel.

Benchmark Brent crude oil increased 41 cents a barrel, or 0.7%, at $55.86 and U.S. West Texas Intermediate crude increase  27 cents, or 0.5%, to $52.64 a barrel.

The analyst believes that for the first quarter of 2017, the price of oil will be about the $55 a barrel-mark, until the real effect of the reductions are felt. Others offer hope for $60 per barrel.

However, anticipations  of  increasing  oil production in the United States, along with the U.S. federal holiday on Monday capped price gains.

Goldman Sachs  stated it anticipates YoY U.S. oil output to increase by 235,000 barrels per day in 2017, take into consideration wells that have been drilled and are expected to begin producing in the first half of the year.

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Gold Prices Inch Up in Asia as U.S. Jobs Data Ahead

On Friday, gold prices inched higher in Asia with the jobs statistic in the U.S.observe for indications on the predictions of the Fed Reserve rate hike path in 2017.

Delivery of gold for February on the Comex division of the New York Mercantile Exchange eased 0.20 percent to $1.178.95 a troy ounce. Copper futures increased  0.24% to $2.541 a pound.

Later on Friday, nonfarm payrolls data from the U.S. is projected to set the tone for gold as it is sensitive to higher interest rates and a stronger greenback. The Fed Reserve in December forecast as many as three rate hikes in 2017.

On Thursday, suddenly the gold prices rallied to a four week peak, as the  U.S. greenback moves further away from a 14 year high against a basket of major currencies following the release of  the statement from the Federal Reserve.

Minutes from the Fed’s December policy meeting displayed most officials thought the U.S. economy could develop more quickly because of tax reductions and infrastructure expenditure under President-elect Donald Trump’s incoming administration.

At the same time, policymakers “emphasized their considerable uncertainty” about future economic policy changes.

The minutes of the meeting also presented that policymakers assumed that Trump’s promises of fiscal stimulus could, if delivered, spur inflation, which would in turn lead to a quicker pace of rate increases this year.

On January 20, 2017, Trump will take office and has yet to plan his economic policies in details.

On Additional News

On Friday, oil prices were steady, as the beginning of supply reductions by Saudi Arabia and Abu Dhabi supported the market, however, uncertainties that all producers will carry out production cuts agreed on a landmark agreement last year kept the markets from increasing further.

Brent crude futures, the benchmark for international oil prices, were trading at $56.85 per barrel at 0238 GMT, down 4 cents from their close the prior day.

West Texas Intermediate (WTI) crude futures in the United States were at $53.74 a barrel, two cents below their last agreement.

Thursday’s prices increased after  reports of supply reductions from Saudi Arabia and Abu Dhabi coming into effect as part of efforts by the Organization of the Petroleum Exporting Countries and other producers to curb a global supply surplus.

Overall supply from Organization of the Petroleum Exporting Countries (OPEC) in the December  drop slightly to 34.18 million barrels per day (bpd) from a revised 34.38 million bpd in November, according to the reports.

Although traders stated oil markets were well supported by the agreed reductions, they said uncertainties remained that all producers would fully implement planned reductions.

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